Acquisitions and Divestiture

12 Months Ended

Dec. 31, 2015

Business Combinations [Abstract]

Acquisitions and Divestiture

3. Acquisitions and Divestiture

Step-acquisition of J-Devices

In October 2009, Amkor and Toshiba invested in Nakaya Microdevices Corporation (“NMD”) and formed a joint venture to provide semiconductor packaging and test services in Japan. As a result of the transaction, NMD changed its name to J-Devices Corporation. We invested $16.7 million for our original 30% equity interest and options to acquire additional equity interests. We exercised our options and increased our ownership interest in J-Devices from 30% to 60% in April 2013, for an aggregate purchase price of $67.4 million, and from 60% to 65.7% in January 2015, for an aggregate purchase price of $12.9 million. Through the exercise of additional options, on December 30, 2015, we increased our ownership interest in J-Devices from 65.7% to 100% for a purchase price of $105.4 million. The acquisition of the remaining interest expands our presence in Japan and our business worldwide by capitalizing on our leadership position in the automotive market.

The governance provisions applicable to J-Devices before our ownership reached 80% restricted our ability, even with our majority ownership, to cause J-Devices to take certain actions without the consent of the other investors. Accordingly, prior to December 30, 2015, we accounted for our investment in J-Devices using the equity method of accounting. Under the equity method of accounting, we recognized our proportionate share of J-Devices’ net income or loss, which is after J-Devices' income taxes in Japan, during each accounting period as a change in our investment in unconsolidated affiliate. In addition, we recorded equity method adjustments as a change in our investment. The equity method adjustments included the amortization of basis differences between the cost of our investment and our proportionate share of J-Devices' equity. These basis differences were the result of us acquiring interests in J-Devices' equity at a discount or a premium to book value, as the case may be. Upon the increase in our ownership interest to 100% on December 30, 2015, the governance restrictions lapsed, we obtained control of J-Devices and changed our accounting for J-Devices to the consolidation method effective December 30, 2015. Since there were no material transactions from December 30, 2015 to December 31, 2015, and for the convenience of reporting the acquisition for accounting purposes, December 31, 2015 was designated as the acquisition date.

The following table summarizes the consideration transferred to acquire J-Devices and the amounts of identifiable assets acquired and liabilities assumed at the acquisition date:

	(In thousands)
Fair value of consideration transferred:
Cash	$	105,391
Fair value of our previously held equity interest in J-Devices	167,684
Total	$	273,075
Recognized amounts of identifiable assets acquired and liabilities assumed:
Cash	$	127,968
Accounts receivable	180,177
Inventory	42,502
Other current assets	2,363
Property, plant and equipment	230,319
Other assets	9,268
Short-term borrowings and current portion of long-term debt	(36,770		)
Other current liabilities	(251,405		)
Long-term debt	(18,885		)
Pension obligations	(22,250		)
Other non-current liabilities	(9,655		)
Total identifiable net assets	253,632
Goodwill	19,443
Total	$	273,075

The goodwill is attributable to the workforce of J-Devices, as well as cost savings and synergies expected from combining the operations of J-Devices. It is not deductible for tax purposes.

As a result of obtaining control over J-Devices, our previously held equity interest of 65.7% was remeasured to fair value, resulting in a gain of $16.1 million. Additionally, our previously held equity interest in J-Devices' accumulated foreign currency translation adjustments was released upon consolidation of J-Devices, resulting in a loss of $30.0 million (Note 15). The combined net loss of $13.9 million was recognized in other (income) expense, net (Note 5) in our Consolidated Financial Statements.

The fair value of our previously held equity interest in J-Devices was estimated by applying an income approach using the discounted cash flow method. The fair value measurement is based on significant inputs not observable in the market and thus represents a Level 3 fair value measurements. Key assumptions include our estimates of J-Devices’ financial projections, a terminal value based on its expected long-term growth rate and a discount rate based on the weighted average cost of capital of comparable companies.

The following unaudited pro forma consolidated results of operations have been prepared as if the acquisition of J-Devices had occurred on January 1, 2014. The pro forma results include adjustments related to alignment to our accounting policies, the effect of fair value adjustments on property, plant and equipment and the related income tax effect. We also eliminated inter-company activity between the parties in the consolidated results. The pro forma results include the activities that are non-recurring and not representative of future activities, including the gain of $16.2 million from reversal of a deferred tax asset valuation allowance and the gain of $12.6 million from release of accumulated foreign currency translation adjustments associated with merging our subsidiary into J-Devices in 2014, offset by the loss on acquisition of J-Devices of $13.9 million in 2014.

This pro forma data is presented for informational purposes only and does not purport to be indicative of the results of future operations or of the results that would have occurred had the 2015 acquisition taken place on January 1, 2014. The pro forma information does not include any potential revenue enhancements, cost synergies or other operating efficiencies that could result from the acquisition.

	For the Year Ended December 31,
	2015		2014
	(unaudited)		(unaudited)
	(In thousands, except per share data)
Net sales	$	3,696,495	$	4,051,076
Net income	98,003		153,750
Net income attributable to Amkor	95,207		150,249
Basic earnings per share	0.40		0.65
Diluted earnings per share	0.40		0.64

Sale of Subsidiary to J-Devices

On June 30, 2014, we sold 100% of the shares of our wholly-owned subsidiary engaged in semiconductor packaging and test operations in Japan to J-Devices (our previously held equity method investee) for ¥1.1 billion. We received ¥0.1 billion ($1.0 million) in cash from J-Devices at closing and received the remaining ¥1.0 billion ($8.4 million) on June 30, 2015. We recognized a net gain on the sale of $9.2 million in our Consolidated Financial Statements in other (income) expense, net, which includes a gain of $12.6 million from the release of accumulated foreign currency translation adjustments associated with the entity (Note 15). J-Devices recognized a gain of $14.7 million on the transaction in its Consolidated Financial Statements as the fair value of the net assets acquired exceeded the purchase price. The gain recognized by J-Devices increased our equity in earnings of J-Devices by $8.8 million. The combined net gain we recognized was $18.0 million.

Acquisition of Amkor Technology Malaysia Sdn. Bhd.

On July 31, 2013, we completed the purchase of 100% of the shares of Toshiba Electronics Malaysia Sdn. Bhd., Toshiba’s power discrete semiconductor packaging and test operation in Malaysia, and subsequently changed the name of the entity to Amkor Technology Malaysia Sdn. Bhd. The total price for the shares was $61.2 million, based on the net asset value at closing. We paid $42.4 million in cash at closing and paid the remaining $18.8 million in March 2014. We were also granted a non-exclusive, royalty bearing license by Toshiba to certain intellectual property rights for providing packaging and test services for power discrete and certain other semiconductor products. The license has a royalty cap of ¥1.5 billion (approximately $12 million). Under the purchase method of accounting, we allocated the purchase price to the assets acquired and liabilities assumed based on their estimated fair values on the date of acquisition. We did not record any goodwill as a result of the acquisition.