 | News Release | ||||
Amkor Technology Reports Financial Results for the Third Quarter 2019
Third Quarter Highlights
•Third quarter net sales $1,084 million, up 21% sequentially
•Operating income $79 million
•Net income $54 million, earnings per diluted share $0.23
•EBITDA $209 million
TEMPE, Ariz. - October 28, 2019 - Amkor Technology, Inc. (NASDAQ: AMKR), a leading provider of semiconductor packaging and test services, today announced financial results for the third quarter ended September 30, 2019.
"Sequential revenue growth of 21% drove financial results above the high end of guidance," said Steve Kelley, Amkor's president and chief executive officer. "Demand was particularly strong for our advanced packaging technologies."
| Results | Q3 2019 | Q2 2019 | Q3 2018 | |||||||||||||||||
| ($ in millions, except per share data) | ||||||||||||||||||||
| Net sales | $1,084 | $895 | $1,144 | |||||||||||||||||
| Gross margin | 16.8% | 13.8% | 17.5% | |||||||||||||||||
| Operating income | $79 | $23 | $93 | |||||||||||||||||
| Net income attributable to Amkor (1) | $54 | ($9) | $57 | |||||||||||||||||
| Earnings per diluted share (1) | $0.23 | ($0.04) | $0.24 | |||||||||||||||||
EBITDA (2) | $209 | $149 | $235 | |||||||||||||||||
(1) Q2 2019 net income includes an $8 million charge, or $0.03 per share, related to the early redemption of $525 million of senior notes due 2022.
(2) EBITDA is a non-U.S. GAAP measure. The reconciliation to the comparable U.S. GAAP measure is included below under "Selected Operating Data."
"Operating margin, earnings per share and EBITDA all showed meaningful sequential improvement in the third quarter," said Megan Faust, Amkor's corporate vice president and chief financial officer. "Based on our solid business outlook for the fourth quarter, we expect to deliver a fifth consecutive year of positive free cash flow."
At September 30, 2019, cash and cash equivalents were $600 million, and total debt was $1.3 billion.
Business Outlook
"We expect revenue of about $1.1 billion in the fourth quarter, reflecting continued healthy demand for Amkor's advanced packages," said Kelley.
Fourth quarter 2019 outlook:
•Net sales of $1.05 billion to $1.14 billion
•Gross margin of 15% to 18%
•Net income of $26 million to $78 million, or $0.11 to $0.32 per diluted share
•Full year 2019 capital expenditures of approximately $475 million
Conference Call Information
Amkor will conduct a conference call on Monday, October 28, 2019, 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 4599721). 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 more than 300 of 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.
Contact:
Vincent Keenan
Vice President, Investor Relations
480-786-7594
vincent.keenan@amkor.com
AMKOR TECHNOLOGY, INC.
Selected Operating Data
| Q3 2019 | Q2 2019 | Q3 2018 | |||||||||||||||
| Net Sales Data: | |||||||||||||||||
| Net sales (in millions): | |||||||||||||||||
| Advanced products (1) | $ | 589 | $ | 433 | $ | 582 | |||||||||||
| Mainstream products (2) | 495 | 462 | 562 | ||||||||||||||
| Total net sales | $ | 1,084 | $ | 895 | $ | 1,144 | |||||||||||
| Packaging services | 84 | % | 83 | % | 84 | % | |||||||||||
| Test services | 16 | % | 17 | % | 16 | % | |||||||||||
| Net sales from top ten customers | 62 | % | 62 | % | 62 | % | |||||||||||
| End Market Data: | |||||||||||||||||
| Communications (handheld devices, smartphones, tablets) | 41 | % | 37 | % | 47 | % | |||||||||||
| Automotive, industrial and other (driver assist, infotainment, performance, safety) | 26 | % | 29 | % | 25 | % | |||||||||||
| Computing (datacenter, infrastructure, PC/laptop, storage) | 15 | % | 19 | % | 17 | % | |||||||||||
| Consumer (connected home, set-top boxes, televisions, visual imaging, wearables) | 18 | % | 15 | % | 11 | % | |||||||||||
| Total | 100 | % | 100 | % | 100 | % | |||||||||||
| Gross Margin Data: | |||||||||||||||||
| Net sales | 100.0 | % | 100.0 | % | 100.0 | % | |||||||||||
| Cost of sales: | |||||||||||||||||
| Materials | 40.4 | % | 38.0 | % | 40.3 | % | |||||||||||
| Labor | 15.8 | % | 17.4 | % | 15.1 | % | |||||||||||
| Other manufacturing | 27.0 | % | 30.8 | % | 27.1 | % | |||||||||||
| Gross margin | 16.8 | % | 13.8 | % | 17.5 | % | |||||||||||
(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: | |||||||||||||||||
| Q3 2019 | Q2 2019 | Q3 2018 | |||||||||||||||
| (in millions) | |||||||||||||||||
| EBITDA Data: | |||||||||||||||||
| Net income | $ | 54 | $ | (9) | $ | 57 | |||||||||||
| Plus: Interest expense | 17 | 19 | 20 | ||||||||||||||
| Plus: Income tax expense | 9 | 6 | 14 | ||||||||||||||
| Plus: Depreciation & amortization | 129 | 133 | 144 | ||||||||||||||
| EBITDA | $ | 209 | $ | 149 | $ | 235 | |||||||||||
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 | |||||||||||||||||||
AMKOR TECHNOLOGY, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
| September 30, 2019 | December 31, 2018 | ||||||||||
| (In thousands) | |||||||||||
| 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 | |||||||||
| Stockholders’ equity: | |||||||||||
| Preferred stock | — | — | |||||||||
| Common stock | 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 | (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 | |||||||
*Effective January 1, 2019, we adopted Accounting Standards Update (ASU) No. 2016-02, Leases (Topic 842). Upon adoption, we recorded a right-of-use asset and lease liability on our balance sheet. Prior period financial statements were not required to be adjusted for the effects of this new standard.
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 | |||||||
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 including statements regarding our fourth quarter outlook, delivery of free cash flow, 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:
•the highly unpredictable nature, cyclicality, and rate of growth 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;
•laws, rules, regulations and policies imposed by the U.S. or foreign governments in areas such as tariffs, customs, duties and other restrictive trade barriers, national security, data privacy and cybersecurity, antitrust and competition, tax, currency and banking, privacy, labor, environmental, health and safety, and in particular the recent increase in protectionist measures considered or adopted by the 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;
•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 or for electronic devices;
•delays, lower manufacturing yields and supply constraints relating to wafers, particularly for advanced nodes and related technologies;
•dependence on key customers, the impact of changes in our market share and prices for our services with those customers and the business and financial condition of those customers;
•the performance of our business, interest rate fluctuations and other 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 and the impact of other legal proceedings;
•changes in tax rates and taxes as a result of changes in U.S. or foreign tax law or the interpretations thereof (including the impact of U.S. tax reform), changes in our organizational structure, changes in the jurisdictions in which our income is determined to be earned and taxed, the outcome of tax reviews, audits and 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 debt covenants, including the potential impact of the phase-out of LIBOR on our variable interest rate debt;
•failure to realize sufficient cash flow or access to other sources of liquidity to fund capital expenditures;
•the effects of an economic slowdown in major economies worldwide;
•disruptions in our business or deficiencies in our controls resulting from the integration of acquired operations, particularly J-Devices, or the implementation and security of, and changes to, our enterprise resource planning, factory shop floor systems and other management information systems;
•there can be no assurance regarding when our K5 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;
•economic effects of terrorist attacks, political instability, natural disasters and military conflict;
•competition, competitive pricing and declines in average selling prices;
•fluctuations in packaging and test manufacturing yields;
•dependence on international operations and sales and fluctuations in foreign currency exchange rates, particularly in Japan and Korea;
•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; 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, 2018 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.