Amkor Technology Reports Financial Results for the Third Quarter

Amkor Technology Reports Financial Results for the Third Quarter 2013

Selected Operating Data

In the press release above we provide adjusted gross margin, adjusted net income and adjusted earnings per diluted share for the third quarter 2013. We present these non-GAAP amounts to demonstrate the impact of the loss contingency we recognized related to our pending patent license arbitration. These measures have limitations, including that they exclude the charges for the arbitration panel award, which is an amount that the company may ultimately have to pay in cash. Furthermore, the factors affecting the calculation of the arbitration award are complex and subject to determination by the arbitration panel. Therefore, the final amount of the loss may be more than the amount we have recognized. Accordingly, these measures that exclude the loss contingency accrual should be considered in addition to, and not as a substitute for, or superior to, gross margin, net income and earnings per diluted share prepared in accordance with U.S. GAAP. Below is the reconciliation of adjusted gross margin, adjusted net income and adjusted earnings per diluted share to U.S. GAAP gross margin, net income and earnings per diluted share.

Non-GAAP Financial Measures Reconciliation:
	Q3 2013
Gross margin		18.4	%
Plus: Loss contingency divided by net sales		1.3	%
Adjusted gross margin		19.7	%

	(In millions)
Net income	$	25
Plus: Loss contingency, net of tax		10
Adjusted net income	$	35

Earnings per diluted share	$	0.11
Plus: Loss contingency per diluted share		0.04
Adjusted earnings per diluted share	$	0.15

AMKOR TECHNOLOGY, INC. CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2013			2012			2013			2012
	(In thousands, except per share data)
Net sales	$	767,987		$	695,353		$	2,201,575		$	2,036,890
Cost of sales		626,979			578,566			1,807,235			1,725,802
Gross profit		141,008			116,787			394,340			311,088
Operating expenses:
Selling, general and administrative		64,347			49,297			189,524			160,041
Research and development		18,647			13,472			47,261			40,764
Total operating expenses		82,994			62,769			236,785			200,805
Operating income		58,014			54,018			157,555			110,283
Other expense (income):
Interest expense		26,104			19,689			71,921			60,727
Interest expense, related party		1,243			3,493			7,927			10,477
Interest income		(1,605	)		(772	)		(3,108	)		(2,489	)
Foreign currency (gain) loss, net		(2,716	)		2,394			(1,841	)		4,461
Loss on debt retirement, net		—			—			11,619			—
Equity in earnings of unconsolidated affiliate		(3,179	)		(2,541	)		(4,679	)		(5,421	)
Other income, net		(7	)		(359	)		(344	)		(1,511	)
Total other expense, net		19,840			21,904			81,495			66,244
Income before income taxes		38,174			32,114			76,060			44,039
Income tax expense		12,170			9,538			5,961			9,009
Net income		26,004			22,576			70,099			35,030
Net income attributable to noncontrolling interests		(655	)		(259	)		(1,641	)		(358	)
Net income attributable to Amkor	$	25,349		$	22,317		$	68,458		$	34,672

Net income attributable to Amkor per common share:
Basic	$	0.12		$	0.14		$	0.38		$	0.21
Diluted	$	0.11		$	0.11		$	0.33		$	0.19

Shares used in computing per common share amounts:
Basic		216,499			154,365			176,839			162,699
Diluted		235,143			237,060			235,119			245,431

AMKOR TECHNOLOGY, INC. CONSOLIDATED BALANCE SHEETS (Unaudited)

	September 30, 2013			December 31, 2012
	(In thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	591,310		$	413,048
Restricted cash		2,681			2,680
Accounts receivable:
Trade, net of allowances		429,788			389,699
Other		4,210			13,098
Inventories		222,663			227,439
Other current assets		38,131			45,444
Total current assets		1,288,783			1,091,408
Property, plant and equipment, net		1,947,448			1,819,969
Intangibles, net		4,058			4,766
Investments		105,097			38,690
Restricted cash		2,264			2,308
Other assets		129,268			68,074
Total assets	$	3,476,918		$	3,025,215

LIABILITIES AND EQUITY
Current liabilities:
Short-term borrowings and current portion of long-term debt	$	56,350		$	—
Trade accounts payable		432,490			439,663
Accrued expenses		290,843			212,964
Total current liabilities		779,683			652,627
Long-term debt		1,519,527			1,320,000
Long-term debt, related party		75,000			225,000
Pension and severance obligations		160,550			139,379
Other non-current liabilities		12,801			21,415
Total liabilities		2,547,561			2,358,421
Equity:
Amkor stockholders’ equity:
Preferred stock		—			—
Common stock		262			198
Additional paid-in capital		1,811,178			1,614,143
Accumulated deficit		(688,186	)		(756,644	)
Accumulated other comprehensive income		6,840			11,241
Treasury stock		(211,217	)		(210,983	)
Total Amkor stockholders’ equity		918,877			657,955
Noncontrolling interests in subsidiaries		10,480			8,839
Total equity		929,357			666,794
Total liabilities and equity	$	3,476,918		$	3,025,215

AMKOR TECHNOLOGY, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

	For the Nine Months Ended September 30,
	2013			2012
	(In thousands)
Cash flows from operating activities:
Net income	$	70,099		$	35,030
Depreciation and amortization		302,007			272,891
Loss on debt retirement, net		11,619			—
Other operating activities and non-cash items		(12,728	)		(724	)
Changes in assets and liabilities		4,248			(22,761	)
Net cash provided by operating activities		375,245			284,436

Cash flows from investing activities:
Purchases of property, plant and equipment		(402,004	)		(380,344	)
Acquisition of business, net of cash acquired		(41,865	)		—
Proceeds from the sale of property, plant and equipment		26,505			3,759
Payments from unconsolidated affiliate		8,843			13,684
Investment in unconsolidated affiliate		(67,372	)		—
Other investing activities		(1,015	)		1,451
Net cash used in investing activities		(476,908	)		(361,450	)

Cash flows from financing activities:
Borrowings under revolving credit facilities		5,000			—
Payments under revolving credit facilities		(5,000	)		—
Borrowings under short-term debt		—			30,000
Payments of short-term debt		—			(40,000	)
Proceeds from issuance of long-term debt		293,000			562,528
Payments of long-term debt, net		—			(272,976	)
Payments for debt issuance costs		(3,216	)		(6,007	)
Payments for the retirement of debt		(11,619	)		—
Payments for repurchase of common stock		—			(80,946	)
Proceeds from the issuance of stock through share-based compensation plans		—			181
Payments of tax withholding for restricted shares		(234	)		(546	)
Net cash provided by financing activities		277,931			192,234

Effect of exchange rate fluctuations on cash and cash equivalents		1,994			(766	)

Net increase in cash and cash equivalents		178,262			114,454
Cash and cash equivalents, beginning of period		413,048			434,631
Cash and cash equivalents, end of period	$	591,310		$	549,085

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