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Amkor Technology Reports Financial Results for the First Quarter 2020

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, 2020.

“First quarter revenue grew almost 30% year-on-year, driven by strength in the communications and consumer markets,” said Steve Kelley, Amkor’s president and chief executive officer. “Our factory team executed remarkably well in a challenging environment.”

Results

Q1 2020

Q4 2019

Q1 2019

($ in millions, except per share data)

Net sales

$1,153

$1,178

$895

Gross margin

16.4%

18.9%

13.5%

Operating income

$84

$118

$13

Operating margin

7.3%

10.0%

1.5%

Net income attributable to Amkor (1)

$64

$99

($23)

Earnings per diluted share (1)

$0.26

$0.41

($0.10)

EBITDA (2)

$210

$244

$153

 

(1) Q4 2019 net income includes a $4 million discrete income tax benefit, or $0.01 per diluted share, primarily related to changes in the valuation of certain deferred tax assets. Q1 2019 net income includes a $15 million non-cash discrete income tax charge, or $0.06 per diluted share, to reduce the value of certain deferred tax assets.

 

(2) EBITDA is a non-GAAP measure. The reconciliation to the comparable GAAP measure is included below under “Selected Operating Data.”

“Strong year over year revenue growth drove profitability well above year-ago levels,” said Megan Faust, Amkor’s executive vice president and chief financial officer. “We will continue to make strategic investments to support growth in our target markets while being cautious with discretionary spending.”

At March 31, 2020, total cash and short-term investments was $1.0 billion, and total debt was $1.5 billion.

Business Outlook

“We continue to be excited about Amkor’s prospects for growth in the medium- and long-term,” said Kelley. “At the same time, we are well-prepared to deal with fluctuations in near-term demand due to recent macroeconomic events.”

Second quarter 2020 outlook (unless otherwise noted):

  • Net sales of $1.0 billion to $1.1 billion
  • Gross margin of 9.5% to 13.5%
  • Net income of ($32) million to $19 million, or ($0.13) to $0.08 per diluted share
  • Full year 2020 capital expenditures of approximately $550 million

Conference Call Information

Amkor will conduct a conference call on Monday, April 27, 2020, 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 1-877-645-6380 or 1-404-991-3911. A replay of the call will be made available at Amkor’s website or by dialing 1-855-859-2056 or 1-404-537-3406 (conference ID 3086586). The webcast is also being distributed over NASDAQ OMX’s investor distribution network to both institutional and individual investors. Institutional investors can access the call via NASDAQ OMX’s password-protected event management site, Street Events (www.streetevents.com).

About Amkor Technology, Inc.

Amkor Technology, Inc. is one of the world’s largest providers of outsourced semiconductor packaging and test services. Founded in 1968, Amkor pioneered the outsourcing of IC packaging and test, and is now a strategic manufacturing partner for the world’s leading semiconductor companies, foundries and electronics OEMs. Amkor’s operational base includes production facilities, product development centers, and sales and support offices located in key electronics manufacturing regions in Asia, Europe and the USA. For more information, visit www.amkor.com.

AMKOR TECHNOLOGY, INC.

Selected Operating Data

 

Q1 2020

Q4 2019

Q1 2019

Net Sales Data:

Net sales (in millions):

Advanced products (1)

$

705

$

667

$

422

Mainstream products (2)

448

511

473

Total net sales

$

1,153

$

1,178

$

895

Packaging services

85

%

84

%

82

%

Test services

15

%

16

%

18

%

Net sales from top ten customers

67

%

65

%

66

%

End Market Data:

Communications (handheld devices, smartphones, tablets)

38

%

37

%

38

%

Consumer (connected home, set-top boxes, televisions, visual imaging, wearables)

24

%

24

%

14

%

Automotive, industrial and other (driver assist, infotainment, performance, safety)

23

%

25

%

28

%

Computing (datacenter, infrastructure, PC/laptop, storage)

15

%

14

%

20

%

Total

100

%

100

%

100

%

Gross Margin Data:

Net sales

100.0

%

100.0

%

100.0

%

Cost of sales:

Materials

45.3

%

42.6

%

38.0

%

Labor

14.2

%

13.9

%

17.4

%

Other manufacturing

24.1

%

24.6

%

31.1

%

Gross margin

16.4

%

18.9

%

13.5

%

 

(1) Advanced products include flip chip and wafer-level processing and related test services

(2) Mainstream products include wirebond packaging and related test services

AMKOR TECHNOLOGY, INC.

Selected Operating Data

 

In this press release, we provide EBITDA, which is not defined by U.S. GAAP. We define EBITDA as net income before interest expense, income tax expense and depreciation and amortization. We believe EBITDA to be relevant and useful information to our investors because it provides additional information in assessing our financial operating results. Our management uses EBITDA in evaluating our operating performance, our ability to service debt and our ability to fund capital expenditures. However, EBITDA has certain limitations in that it does not reflect the impact of certain expenses on our consolidated statements of income, including interest expense, which is a necessary element of our costs because we have borrowed money in order to finance our operations, income tax expense, which is a necessary element of our costs because taxes are imposed by law, and depreciation and amortization, which is a necessary element of our costs because we use capital assets to generate income. EBITDA should be considered in addition to, and not as a substitute for, or superior to, operating income, net income or other measures of financial performance prepared in accordance with U.S. GAAP. Furthermore our definition of EBITDA may not be comparable to similarly titled measures reported by other companies. Below is our reconciliation of EBITDA to U.S. GAAP net income.

 

Non-GAAP Financial Measure Reconciliation:

Q1 2020

Q4 2019

Q1 2019

(in millions)

EBITDA Data:

Net income

$

64

$

100

$

(23

)

Plus: Interest expense

17

17

19

Plus: Income tax expense

5

1

21

Plus: Depreciation & amortization

124

126

136

EBITDA

$

210

$

244

$

153

AMKOR TECHNOLOGY, INC.

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

 

For the Three Months Ended

March 31,

2020

2019

(In thousands, except per share data)

Net sales

$

1,152,616

$

894,964

Cost of sales

963,708

774,203

Gross profit

188,908

120,761

Selling, general and administrative

72,582

71,587

Research and development

32,253

35,754

Total operating expenses

104,835

107,341

Operating income

84,073

13,420

Interest expense

17,045

19,273

Other (income) expense, net

(2,315

)

(4,565

)

Total other expense, net

14,730

14,708

Income (loss) before taxes

69,343

(1,288

)

Income tax expense

4,846

21,380

Net income (loss)

64,497

(22,668

)

Net income attributable to non-controlling interests

(608

)

(211

)

Net income (loss) attributable to Amkor

$

63,889

$

(22,879

)

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

Basic

$

0.27

$

(0.10

)

Diluted

$

0.26

$

(0.10

)

Shares used in computing per common share amounts:

Basic

240,919

239,414

Diluted

241,333

239,414

AMKOR TECHNOLOGY, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

March 31,

2020

December 31,

2019

(In thousands)

ASSETS

Current assets:

Cash and cash equivalents

$

941,447

$

894,948

Restricted cash

610

610

Short-term investments

58,263

6,348

Accounts receivable, net of allowances

880,629

850,753

Inventories

238,201

220,602

Other current assets

34,553

28,272

Total current assets

2,153,703

2,001,533

Property, plant and equipment, net

2,367,746

2,404,850

Operating lease right of use assets

147,985

148,549

Goodwill

26,235

25,976

Restricted cash

3,267

2,974

Other assets

112,701

111,733

Total assets

$

4,811,637

$

4,695,615

LIABILITIES AND EQUITY

Current liabilities:

Short-term borrowings and current portion of long-term debt

$

141,521

$

144,479

Trade accounts payable

562,633

571,054

Capital expenditures payable

107,131

77,044

Accrued expenses

236,464

267,226

Total current liabilities

1,047,749

1,059,803

Long-term debt

1,371,501

1,305,755

Pension and severance obligations

178,084

176,971

Long-term operating lease liabilities

89,733

91,107

Other non-current liabilities

65,945

71,740

Total liabilities

2,753,012

2,705,376

Stockholders’ equity:

Preferred stock

Common stock

287

287

Additional paid-in capital

1,931,088

1,927,739

Retained earnings

297,966

234,077

Accumulated other comprehensive income (loss)

19,709

19,115

Treasury stock

(217,533

)

(217,479

)

Total Amkor stockholders’ equity

2,031,517

1,963,739

Non-controlling interests in subsidiaries

27,108

26,500

Total equity

2,058,625

1,990,239

Total liabilities and equity

$

4,811,637

$

4,695,615

AMKOR TECHNOLOGY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

For the Three Months Ended March 31,

2020

2019

(In thousands)

Cash flows from operating activities:

Net income (loss)

$

64,497

$

(22,668

)

Depreciation and amortization

123,657

135,835

Other operating activities and non-cash items

8,287

15,928

Changes in assets and liabilities

(99,852

)

(77,038

)

Net cash provided by operating activities

96,589

52,057

Cash flows from investing activities:

Payments for property, plant and equipment

(55,888

)

(203,216

)

Proceeds from sale of property, plant and equipment

1,887

180

Proceeds from insurance recovery for property, plant and equipment

1,538

Payments for short-term investments

(55,754

)

Other investing activities

5,163

(569

)

Net cash used in investing activities

(104,592

)

(202,067

)

Cash flows from financing activities:

Proceeds from revolving credit facilities

201,000

Proceeds from short-term debt

14,086

29,781

Payments of short-term debt

(9,409

)

(10,588

)

Proceeds from issuance of long-term debt

24,000

572,375

Payments of long-term debt

(172,336

)

(63,636

)

Payments of finance lease obligations

(2,355

)

(1,376

)

Other financing activities

109

(2,848

)

Net cash provided by financing activities

55,095

523,708

Effect of exchange rate fluctuations on cash, cash equivalents and restricted cash

(300

)

(829

)

Net increase in cash, cash equivalents and restricted cash

46,792

372,869

Cash, cash equivalents and restricted cash, beginning of period

898,532

688,051

Cash, cash equivalents and restricted cash, end of period

$

945,324

$

1,060,920

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 statements regarding the strength of the communications and consumer markets, statements regarding our strategic investments and discretionary spending and 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:

  • health conditions or pandemics, such as COVID-19, impacting labor availability and operating capacity, capital availability, the supply chain and consumer demand for our customers’ products and services;
  • dependence on the highly cyclical, volatile semiconductor industry;
  • industry downturns and declines in global economic and financial conditions;
  • fluctuation in demand for semiconductors and conditions in the semiconductor industry generally, as well as by specific customers, such as inventory reductions by our customers impacting demand in key markets;
  • changes in our capacity and capacity utilization rates and fluctuations in our manufacturing yields;
  • the development, transition and ramp to high volume manufacture of more advanced silicon nodes and evolving wafer, packaging and test technologies, may cause production delays, lower manufacturing yields and supply constraints for new wafers and other materials;
  • absence of backlog, the short-term nature of our customers’ commitments, double bookings by customers and deterioration in customer forecasts and the impact of these factors, including the possible delay, rescheduling and cancellation of large orders, or the timing and volume of orders relative to our production capacity;
  • changes in costs, quality, availability and delivery times of raw materials, components and equipment, including any disruption in the supply of certain materials due to regulations and customer requirements, as well as wage inflation and fluctuations in commodity prices;
  • dependence on key customers or concentration of customers in certain end markets, such as mobile communications and automotive;
  • dependence on international factories and operations, and risks relating to our customers’ and vendors’ international operations;
  • laws, rules, regulations and policies imposed by U.S. or foreign governments, such as tariffs, customs, duties and other restrictive trade barriers, national security, data privacy and cybersecurity, antitrust and competition, tax, currency and banking, labor, environmental, health and safety, and in particular the recent increase in tariffs, customs, duties and other restrictive trade barriers considered or adopted by U.S. and foreign governments;
  • laws, rules, regulations and policies within China and other countries that may favor domestic companies over non-domestic companies, including customer- or government-supported efforts to promote the development and growth of local competitors;
  • fluctuations in currency exchange rates, particularly the dollar/yen exchange rate for our operations in Japan;
  • competition with established competitors in the packaging and test business, the internal capabilities of integrated device manufacturers, and new competitors, including foundries;
  • decisions by our integrated device manufacturer and foundry customers to curtail outsourcing;
  • difficulty achieving high capacity utilization rates due to high percentage of fixed costs;
  • our substantial investments in equipment and facilities to support the demand of our customers;
  • there can be no assurance regarding when our factory and research and development center in Korea will be fully utilized, or that the actual scope, costs, timeline or benefits of the project will be consistent with our expectations;
  • the historical downward pressure on the prices of our packaging and test services;
  • any warranty claims, product return and liability risks, and the risk of negative publicity if our products fail, as well as the risk of litigation incident to our business;
  • our substantial indebtedness and restrictive covenants in the indentures and agreements governing our current and future indebtedness;
  • difficulty funding our liquidity needs;
  • our significant severance plan obligations associated with our manufacturing operations in Korea;
  • maintaining an effective system of internal controls;
  • difficulty attracting, retaining or replacing qualified personnel;
  • our continuing development and implementation of changes to, and maintenance and security of, our information technology systems;
  • challenges with integrating diverse operations;
  • any changes in tax laws (including the recent enactment of U.S. tax reform), taxing authorities not agreeing with our interpretation of applicable tax laws, including whether we continue to qualify for tax holidays, or any requirements to establish or adjust valuation allowances on deferred tax assets;
  • our ability to develop new proprietary technology, protect our proprietary technology, operate without infringing the proprietary rights of others, and implement new technologies;
  • natural disasters and other calamities, health conditions or pandemics, political instability, hostilities or other disruptions; and
  • the ability of certain of our stockholders to effectively determine or substantially influence the outcome of matters requiring stockholder approval.

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, 2019 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 except as may be required by law.

Contacts:

Vincent Keenan
Vice President, Investor Relations
480-786-7594
vincent.keenan@amkor.com

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