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Amkor Technology Reports Financial Results for the First Quarter 2014

Amkor Technology, Inc. (NASDAQ: AMKR), a leading provider of semiconductor packaging and test services, today announced financial results for the first quarter ended March 31, 2014, with net sales of $696 million, net income of $21 million, and earnings per diluted share of $0.09.

“First quarter results were stronger than we anticipated, driven by incremental demand for advanced packages,” said Steve Kelley, Amkor's president and chief executive officer. “We made solid progress in winning key mobile device opportunities, expanding our customer base and driving improved profitability.”

Selected financial information for the first quarter 2014 is as follows:

  • Net Sales: $696 million, down 8% from $755 million in the prior quarter, and up 1% from $688 million in the first quarter of 2013
  • Gross Margin: 18.5%, compared to 19.9% in the prior quarter, and 16.7% in the first quarter of 2013
  • Net Income: $21 million, compared to $41 million in the prior quarter, and $13 million in the first quarter of 2013
  • Earnings Per Diluted Share: $0.09, compared to $0.18 in the prior quarter, and $0.07 in the first quarter of 2013

“Our gross margin improved 180 basis points and earnings per share increased 29% over the first quarter 2013 primarily due to improved capacity utilization and lower cost of goods sold,” said Joanne Solomon, Amkor's executive vice president and chief financial officer.

Cash and cash equivalents were $629 million, and total debt was $1.7 billion, at March 31, 2014. In April, we reduced our debt by $116 million and improved our leverage with the conversion of the remaining $56 million of our convertible notes into common stock and the prepayment of $60 million of our foreign debt.

Business Outlook

“Driven by stronger customer forecasts for mobile devices and continued momentum from our growth initiatives, our expectations for the second quarter and full year 2014 have improved considerably,” noted Kelley. “Accordingly, we are raising our expectations for full year 2014 capital expenditures to around $575 million to capture these growth opportunities.”

Based upon currently available information, we have the following expectations for the second quarter 2014:

  • Net sales of $735 million to $785 million, up 6% to 13% from the prior quarter
  • Gross margin of 18% to 21%
  • Net income of $18 million to $43 million, or $0.08 to $0.18 per diluted share
  • Full year 2014 capital expenditures of around $575 million

Conference Call Information

Amkor will conduct a conference call on Monday, April 28, 2014, at 5:00 p.m. Eastern Time. This call may include material information not included in this press release. This call is being webcast and can be accessed at Amkor's website: www.amkor.com. You may also access the call by dialing 1-866-225-8754 or 1-480-629-9819. A replay of the call will be made available at Amkor's website or by dialing 1-800-406-7325 or 1-303-590-3030 (access pass code #4679945). 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 packaging and test services to semiconductor companies and electronics OEMs. More information about Amkor is available from the company's filings with the Securities and Exchange Commission and at Amkor's website: www.amkor.com.

AMKOR TECHNOLOGY, INC.
Selected Operating Data

Since the fourth quarter 2013, we have reported net sales data by the following categories: advanced products and mainstream products. We have also provided quarterly and annual net sales and packaged units for 2012 and 2013 under these revised net sales reporting categories at the Investor Relations section of our website at www.amkor.com.

                         
Q1 2014 Q4 2013 Q1 2013
Net Sales Data:
Net sales (in millions):
Advanced products* $ 302 $ 346 $ 370
Mainstream products** 394   409   318  
Total net sales $ 696   $ 755   $ 688  
 
Packaging services 85 % 85 % 86 %
Test services 15 % 15 % 14 %
 
Net sales from top ten customers 60 % 63 % 63 %
 
Packaged units (in millions):
Advanced products* 650 816 579
Mainstream products** 3,217   3,261   1,722  
Total packaged units 3,867   4,077   2,301  
 
End Market Distribution Data (an approximation including representative devices and applications based on a sampling of our largest customers):

Communications (handsets, tablets, handheld devices, wireless LAN)

53 % 55 % 59 %

Consumer (television, set top boxes, gaming, portable media, digital cameras)

15 % 14 % 14 %

Automotive, industrial and other (infotainment, safety, performance, comfort)

12 % 11 % 8 %
Networking (servers, routers, switches) 10 % 11 % 10 %

Computing (desk tops, PCs, hard disk drive, printers, peripherals, servers)

10   % 9   % 9   %
Total 100   % 100   % 100   %
 
Gross Margin Data:
Net sales 100.0 % 100.0 % 100.0 %
Cost of sales:
Materials 36.8 % 37.2 % 42.5 %
Labor 14.7 % 14.6 % 14.8 %
Other manufacturing 30.0   % 28.3   % 26.0   %
Gross margin 18.5   % 19.9   % 16.7   %
 
Earnings per Share Data:
Net income attributable to Amkor - basic $ 20 $ 41 $ 13
 
Adjustment for dilutive securities on net income:
Interest on 6.0% convertible notes due 2014, net of tax 1   1   4  
Net income attributable to Amkor - diluted $ 21   $ 42   $ 17  
 
Weighted average shares outstanding - basic 216 216 152
Effect of dilutive securities:
6.0% convertible notes due 2014 19   19   83  
Weighted average shares outstanding - diluted 235   235   235  
 
Net income attributable to Amkor per common share:
Basic $ 0.09   $ 0.19   $ 0.09  
Diluted $ 0.09   $ 0.18   $ 0.07  
 

*Advanced products include flip chip and wafer-level processing and related test services

**Mainstream products include wirebond packaging and related test services and since July 1, 2013 include the results of our newly acquired power discrete business in Malaysia which has a high volume of units relative to revenue

     

AMKOR TECHNOLOGY, INC.

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

 

For the Three Months Ended

March 31,

2014                 2013
(In thousands, except per share data)
Net sales $ 696,044 $ 687,529
Cost of sales 567,224   572,576  
Gross profit 128,820   114,953  
Selling, general and administrative 62,424 59,559
Research and development 21,045   14,306  
Total operating expenses 83,469   73,865  
Operating income 45,351 41,088
Interest expense 23,722 22,078
Interest expense, related party 1,242 3,492
Other expense (income), net 36   (2,222 )
Total other expense, net 25,000   23,348  
Income before taxes and equity in earnings of unconsolidated affiliate 20,351 17,740
Income tax expense 4,929   4,029  
Income before equity in earnings of unconsolidated affiliate 15,422 13,711
Equity in earnings of J-Devices 5,761   55  
Net income 21,183 13,766
Net income attributable to noncontrolling interests (550 ) (384 )
Net income attributable to Amkor $ 20,633   $ 13,382  
 
Net income attributable to Amkor per common share:
Basic $ 0.09   $ 0.09  
Diluted $ 0.09   $ 0.07  
 
Shares used in computing per common share amounts:
Basic 216,757 152,411
Diluted 235,497 235,087
 
 
                     

AMKOR TECHNOLOGY, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

March 31,

2014

December 31,

2013

(In thousands)
ASSETS
Current assets:
Cash and cash equivalents $ 628,585 $ 610,442
Restricted cash 2,681 2,681
Accounts receivable, net of allowances

406,797

385,542

Inventories 197,297 200,423
Other current assets

45,399

 

33,328

 
Total current assets

1,280,759

1,232,416
Property, plant and equipment, net 2,033,396 2,006,553
Investments 114,119 105,214
Restricted cash 2,193 2,234
Other assets 72,872   80,881  
Total assets $ 3,503,339   $ 3,427,298  
 
LIABILITIES AND EQUITY
Current liabilities:
Short-term borrowings and current portion of long-term debt $ 66,350 $ 61,350
Trade accounts payable 416,789 365,334
Accrued expenses 258,558   264,252  
Total current liabilities 741,697 690,936
Long-term debt 1,511,252 1,516,390
Long-term debt, related party 75,000 75,000
Pension and severance obligations 168,020 165,073
Other non-current liabilities 16,010   14,959  
Total liabilities 2,511,979   2,462,358  
 
Amkor stockholders’ equity:
Preferred stock
Common stock 262 262
Additional paid-in capital 1,813,940 1,812,530
Accumulated deficit (626,715 ) (647,348 )
Accumulated other comprehensive income (loss) 3,694 (255 )
Treasury stock (211,571 ) (211,449 )
Total Amkor stockholders’ equity 979,610 953,740
Noncontrolling interests in subsidiaries 11,750   11,200  
Total equity 991,360   964,940  
Total liabilities and equity $ 3,503,339   $ 3,427,298  
 
 
     

AMKOR TECHNOLOGY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

For the Three Months Ended

March 31,

2014                 2013
(In thousands)
Cash flows from operating activities:
Net income $ 21,183 $ 13,766
Depreciation and amortization 108,338 97,148
Other operating activities and non-cash items (4,274 ) (840 )
Changes in assets and liabilities 6,699   (11,400 )

Net cash provided by operating activities

131,946   98,674  
 
Cash flows from investing activities:
Purchases of property, plant and equipment (95,999 ) (112,543 )
Proceeds from the sale of property, plant and equipment 726 24,614
Payments from J-Devices 8,843
Other investing activities (266 ) (249 )
Net cash used in investing activities (95,539 ) (79,335 )
 
Cash flows from financing activities:
Proceeds from issuance of long-term debt 80,000 33,000
Payments of long-term debt (80,000 )
Payment of deferred consideration for an acquisition (18,763 )
Proceeds from the issuance of stock through share-based compensation plans 438
Payments of tax withholding for restricted shares (122 ) (90 )
Net cash (used in) provided by financing activities (18,447 ) 32,910  
 
Effect of exchange rate fluctuations on cash and cash equivalents 183 1,405
 
Net increase in cash and cash equivalents 18,143 53,654
Cash and cash equivalents, beginning of period 610,442   413,048  
Cash and cash equivalents, end of period $ 628,585   $ 466,702  
 
 

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, all of the statements made under "Business Outlook" above. 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 and cyclicality of the semiconductor industry;
  • timing and volume of orders relative to production capacity and the inability to achieve high capacity utilization rates, control costs and improve profitability;
  • volatility of consumer demand, double booking by customers and deterioration in forecasts from our customers for products incorporating our semiconductor packages, including any slowdown in demand or changes in customer forecasts for smartphones or other mobile devices;
  • delays, lower manufacturing yields and supply constraints relating to the ramp to high volume manufacturing of 20 nanometer wafers and related technologies;
  • dependence on key customers and the impact of changes in our market share and prices for our services with those customers;
  • the performance of our business, economic and market conditions, the cash needs and investment opportunities for the business, the need for additional capacity and facilities to service customer demand and the availability of cash flow from operations or financing;
  • the effect of the global economy on credit markets, financial institutions, customers, suppliers and consumers, including the uncertain macroeconomic environment;
  • the highly unpredictable nature and costs of litigation and other legal activities and the risk of adverse results of such matters, including the final outcome in the pending patent license litigation and the impact of other legal proceedings;
  • the negative impact on economic growth resulting from the action or inaction of the U.S. government relating to federal income tax increases for individuals or corporations, the federal debt ceiling, the federal deficit and government spending restrictions or shutdowns;
  • changes in tax rates and taxes as a result of changes in U.S. or foreign 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 or access to other sources of liquidity to fund capital additions;
  • the effects of an economic slowdown in China, the U.S. and other major economies worldwide;
  • disruptions in our business or deficiencies in our controls resulting from the integration of newly acquired operations or the implementation and security of, and changes to, our enterprise resource planning, factory shop floor systems and other management information systems;
  • economic effects of terrorist attacks, natural disasters and military conflict;
  • competition, competitive pricing and declines in average selling prices;
  • fluctuations in manufacturing yields;
  • dependence on international operations and sales and exchange rate fluctuations;
  • dependence on raw material and equipment suppliers and changes in raw material and precious metal costs;
  • dependence on key personnel;
  • enforcement of and compliance with 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, 2013 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.

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