REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of Amkor Technology, Inc.
In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of Amkor Technology, Inc. and its subsidiaries at
December 31, 2016
and
2015
, and the results of their operations and their cash flows for each of the three years in the period ended
December 31, 2016
in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the accompanying index presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of
December 31, 2016
, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for these financial statements and financial statement schedule, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control Over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on these financial statements, on the financial statement schedule, and on the Company’s internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ PricewaterhouseCoopers LLP
Phoenix, Arizona
February 24, 2017
AMKOR TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF INCOME
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
2016
|
|
2015
|
|
2014
|
|
(In thousands, except per share data)
|
Net sales
|
$
|
3,893,635
|
|
|
$
|
2,884,603
|
|
|
$
|
3,129,440
|
|
Cost of sales
|
3,198,158
|
|
|
2,405,338
|
|
|
2,576,618
|
|
Gross profit
|
695,477
|
|
|
479,265
|
|
|
552,822
|
|
Selling, general and administrative
|
284,331
|
|
|
232,409
|
|
|
254,498
|
|
Research and development
|
117,206
|
|
|
82,017
|
|
|
76,864
|
|
Total operating expenses
|
401,537
|
|
|
314,426
|
|
|
331,362
|
|
Operating income
|
293,940
|
|
|
164,839
|
|
|
221,460
|
|
Interest expense
|
79,668
|
|
|
81,407
|
|
|
104,956
|
|
Interest expense, related party
|
4,969
|
|
|
4,969
|
|
|
4,969
|
|
Other (income) expense, net
|
(5,854
|
)
|
|
10,551
|
|
|
(24,543
|
)
|
Total other expense, net
|
78,783
|
|
|
96,927
|
|
|
85,382
|
|
Income before taxes and equity in earnings of unconsolidated affiliate
|
215,157
|
|
|
67,912
|
|
|
136,078
|
|
Income tax expense
|
47,853
|
|
|
28,035
|
|
|
33,845
|
|
Income before equity in earnings of unconsolidated affiliate
|
167,304
|
|
|
39,877
|
|
|
102,233
|
|
Equity in earnings of J-Devices
|
—
|
|
|
14,016
|
|
|
31,007
|
|
Net income
|
167,304
|
|
|
53,893
|
|
|
133,240
|
|
Net income attributable to noncontrolling interests
|
(3,114
|
)
|
|
(2,795
|
)
|
|
(3,501
|
)
|
Net income attributable to Amkor
|
$
|
164,190
|
|
|
$
|
51,098
|
|
|
$
|
129,739
|
|
Net income attributable to Amkor per common share:
|
|
|
|
|
|
Basic
|
$
|
0.69
|
|
|
$
|
0.22
|
|
|
$
|
0.56
|
|
Diluted
|
$
|
0.69
|
|
|
$
|
0.22
|
|
|
$
|
0.55
|
|
Shares used in computing per common share amounts:
|
|
|
|
|
|
Basic
|
237,416
|
|
|
236,850
|
|
|
230,710
|
|
Diluted
|
238,034
|
|
|
237,170
|
|
|
236,731
|
|
The accompanying notes are an integral part of these statements.
AMKOR TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
2016
|
|
2015
|
|
2014
|
|
(In thousands)
|
Net income
|
$
|
167,304
|
|
|
$
|
53,893
|
|
|
$
|
133,240
|
|
Other comprehensive income (loss), net of tax:
|
|
|
|
|
|
Adjustments to unrealized components of defined benefit pension plans, net of tax
|
2,563
|
|
|
1,100
|
|
|
(1,512
|
)
|
Foreign currency translation adjustment
|
5,783
|
|
|
(146
|
)
|
|
(11,964
|
)
|
Equity interest in J-Devices' other comprehensive income (loss), net of tax
|
—
|
|
|
29,433
|
|
|
(18,844
|
)
|
Total other comprehensive income (loss)
|
8,346
|
|
|
30,387
|
|
|
(32,320
|
)
|
Comprehensive income
|
175,650
|
|
|
84,280
|
|
|
100,920
|
|
Comprehensive income attributable to noncontrolling interests
|
(3,114
|
)
|
|
(2,795
|
)
|
|
(3,501
|
)
|
Comprehensive income attributable to Amkor
|
$
|
172,536
|
|
|
$
|
81,485
|
|
|
$
|
97,419
|
|
The accompanying notes are an integral part of these statements.
AMKOR TECHNOLOGY, INC.
CONSOLIDATED BALANCE SHEETS
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2016
|
|
2015
|
|
(In thousands,
except per share data)
|
ASSETS
|
|
|
|
Current assets:
|
|
|
|
Cash and cash equivalents
|
$
|
549,518
|
|
|
$
|
523,172
|
|
Restricted cash
|
2,000
|
|
|
2,000
|
|
Accounts receivable, net of allowances of $9,902 and $3,158
|
563,107
|
|
|
526,143
|
|
Inventories
|
267,990
|
|
|
238,205
|
|
Other current assets
|
27,081
|
|
|
27,960
|
|
Total current assets
|
1,409,696
|
|
|
1,317,480
|
|
Property, plant and equipment, net
|
2,564,648
|
|
|
2,579,017
|
|
Goodwill
|
24,122
|
|
|
23,409
|
|
Restricted cash
|
3,977
|
|
|
2,176
|
|
Other assets
|
89,643
|
|
|
104,346
|
|
Total assets
|
$
|
4,092,086
|
|
|
$
|
4,026,428
|
|
|
|
|
|
LIABILITIES AND EQUITY
|
|
|
|
Current liabilities:
|
|
|
|
Short-term borrowings and current portion of long-term debt
|
$
|
35,192
|
|
|
$
|
76,770
|
|
Trade accounts payable
|
487,430
|
|
|
434,222
|
|
Capital expenditures payable
|
144,370
|
|
|
242,980
|
|
Accrued expenses
|
338,669
|
|
|
264,212
|
|
Total current liabilities
|
1,005,661
|
|
|
1,018,184
|
|
Long-term debt
|
1,364,638
|
|
|
1,435,269
|
|
Long-term debt, related party
|
75,000
|
|
|
75,000
|
|
Pension and severance obligations
|
166,701
|
|
|
167,197
|
|
Other non-current liabilities
|
76,682
|
|
|
113,242
|
|
Total liabilities
|
2,688,682
|
|
|
2,808,892
|
|
Commitments and contingencies (Note 17)
|
|
|
|
|
|
Amkor stockholders’ equity:
|
|
|
|
Preferred stock, $0.001 par value, 10,000 shares authorized, designated Series A, none issued
|
—
|
|
|
—
|
|
Common stock, $0.001 par value, 500,000 shares authorized, 284,479 and 282,724 shares issued, and 238,665 and 237,005 shares outstanding, in 2016 and 2015, respectively
|
284
|
|
|
283
|
|
Additional paid-in capital
|
1,895,089
|
|
|
1,883,592
|
|
Accumulated deficit
|
(303,557
|
)
|
|
(467,747
|
)
|
Accumulated other comprehensive income (loss)
|
6,262
|
|
|
(2,084
|
)
|
Treasury stock, at cost, 45,814 and 45,719 shares in 2016 and 2015, respectively
|
(214,490
|
)
|
|
(213,758
|
)
|
Total Amkor stockholders’ equity
|
1,383,588
|
|
|
1,200,286
|
|
Noncontrolling interests in subsidiaries
|
19,816
|
|
|
17,250
|
|
Total equity
|
1,403,404
|
|
|
1,217,536
|
|
Total liabilities and equity
|
$
|
4,092,086
|
|
|
$
|
4,026,428
|
|
The accompanying notes are an integral part of these statements.
AMKOR TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional Paid-
In Capital
|
|
Accumulated
Deficit
|
|
Accumulated
Other
Comprehensive
Income (Loss)
|
|
|
|
|
|
Total Amkor
Stockholders'
Equity
|
|
Noncontrolling
Interest in
Subsidiaries
|
|
Total
Equity
|
|
Common Stock
|
|
|
|
|
Treasury Stock
|
|
|
|
|
Shares
|
|
Par Value
|
|
|
|
|
Shares
|
|
Cost
|
|
|
|
|
(In thousands)
|
Balance at December 31, 2013
|
262,109
|
|
|
$
|
262
|
|
|
$
|
1,812,530
|
|
|
$
|
(648,584
|
)
|
|
$
|
(151
|
)
|
|
(45,407
|
)
|
|
$
|
(211,449
|
)
|
|
$
|
952,608
|
|
|
$
|
11,200
|
|
|
$
|
963,808
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
129,739
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
129,739
|
|
|
3,501
|
|
|
133,240
|
|
Other comprehensive income (loss)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(32,320
|
)
|
|
—
|
|
|
—
|
|
|
(32,320
|
)
|
|
—
|
|
|
(32,320
|
)
|
Conversion of debt to common stock
|
18,632
|
|
|
19
|
|
|
56,331
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
56,350
|
|
|
—
|
|
|
56,350
|
|
Treasury stock acquired through surrender of shares for tax withholding
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(197
|
)
|
|
(1,579
|
)
|
|
(1,579
|
)
|
|
—
|
|
|
(1,579
|
)
|
Issuance of stock through share-based compensation plans
|
1,490
|
|
|
1
|
|
|
6,249
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6,250
|
|
|
—
|
|
|
6,250
|
|
Share-based compensation
|
—
|
|
|
—
|
|
|
3,700
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,700
|
|
|
—
|
|
|
3,700
|
|
Balance at December 31, 2014
|
282,231
|
|
|
$
|
282
|
|
|
$
|
1,878,810
|
|
|
$
|
(518,845
|
)
|
|
$
|
(32,471
|
)
|
|
(45,604
|
)
|
|
$
|
(213,028
|
)
|
|
$
|
1,114,748
|
|
|
$
|
14,701
|
|
|
$
|
1,129,449
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
51,098
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
51,098
|
|
|
2,795
|
|
|
53,893
|
|
Other comprehensive income (loss)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
30,387
|
|
|
—
|
|
|
—
|
|
|
30,387
|
|
|
—
|
|
|
30,387
|
|
Treasury stock acquired through surrender of shares for tax withholding
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(115
|
)
|
|
(730
|
)
|
|
(730
|
)
|
|
—
|
|
|
(730
|
)
|
Issuance of stock through share-based compensation plans
|
493
|
|
|
1
|
|
|
930
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
931
|
|
|
—
|
|
|
931
|
|
Share-based compensation
|
—
|
|
|
—
|
|
|
3,852
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,852
|
|
|
—
|
|
|
3,852
|
|
Subsidiary dividends paid to noncontrolling interest
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(246
|
)
|
|
(246
|
)
|
Balance at December 31, 2015
|
282,724
|
|
|
$
|
283
|
|
|
$
|
1,883,592
|
|
|
$
|
(467,747
|
)
|
|
$
|
(2,084
|
)
|
|
(45,719
|
)
|
|
$
|
(213,758
|
)
|
|
$
|
1,200,286
|
|
|
$
|
17,250
|
|
|
$
|
1,217,536
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
164,190
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
164,190
|
|
|
3,114
|
|
|
167,304
|
|
Other comprehensive income (loss)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
8,346
|
|
|
—
|
|
|
—
|
|
|
8,346
|
|
|
—
|
|
|
8,346
|
|
Treasury stock acquired through surrender of shares for tax withholding
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(95
|
)
|
|
(732
|
)
|
|
(732
|
)
|
|
—
|
|
|
(732
|
)
|
Issuance of stock through share-based compensation plans
|
1,755
|
|
|
1
|
|
|
8,246
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
8,247
|
|
|
—
|
|
|
8,247
|
|
Share-based compensation
|
—
|
|
|
—
|
|
|
3,251
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,251
|
|
|
—
|
|
|
3,251
|
|
Subsidiary dividends paid to noncontrolling interest
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(548
|
)
|
|
(548
|
)
|
Balance at December 31, 2016
|
284,479
|
|
|
$
|
284
|
|
|
$
|
1,895,089
|
|
|
$
|
(303,557
|
)
|
|
$
|
6,262
|
|
|
(45,814
|
)
|
|
$
|
(214,490
|
)
|
|
$
|
1,383,588
|
|
|
$
|
19,816
|
|
|
$
|
1,403,404
|
|
The accompanying notes are an integral part of these statements.
AMKOR TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
2016
|
|
2015
|
|
2014
|
|
(In thousands)
|
Cash flows from operating activities:
|
|
|
|
|
|
Net income
|
$
|
167,304
|
|
|
$
|
53,893
|
|
|
$
|
133,240
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
Depreciation and amortization
|
555,186
|
|
|
494,200
|
|
|
464,706
|
|
Amortization of deferred debt issuance costs and premiums
|
1,403
|
|
|
1,665
|
|
|
2,237
|
|
Deferred income taxes
|
(1,746
|
)
|
|
(697
|
)
|
|
(17,190
|
)
|
Equity in earnings of unconsolidated affiliate
|
—
|
|
|
(14,016
|
)
|
|
(31,007
|
)
|
Loss on debt retirement
|
—
|
|
|
9,560
|
|
|
757
|
|
Loss (gain) on disposal of fixed assets, net
|
1,390
|
|
|
1,190
|
|
|
1,276
|
|
Share-based compensation
|
3,251
|
|
|
3,852
|
|
|
3,700
|
|
Loss from acquisition of J-Devices
|
—
|
|
|
13,501
|
|
|
—
|
|
Gain on sale of subsidiary to J-Devices
|
—
|
|
|
—
|
|
|
(9,155
|
)
|
Proceeds from insurance recovery for property, plant and equipment
|
(15,166
|
)
|
|
—
|
|
|
—
|
|
Other, net
|
2,858
|
|
|
4,014
|
|
|
869
|
|
Changes in assets and liabilities, net of acquisitions:
|
|
|
|
|
|
Accounts receivable
|
(29,126
|
)
|
|
122,840
|
|
|
(80,775
|
)
|
Inventories
|
(28,397
|
)
|
|
27,677
|
|
|
(27,817
|
)
|
Other current assets
|
1,124
|
|
|
(3,309
|
)
|
|
(8,747
|
)
|
Other assets
|
1,037
|
|
|
333
|
|
|
954
|
|
Trade accounts payable
|
48,581
|
|
|
(48,368
|
)
|
|
55,693
|
|
Accrued expenses
|
56,465
|
|
|
(42,042
|
)
|
|
16,720
|
|
Pension and severance obligations
|
1,625
|
|
|
(7,321
|
)
|
|
(509
|
)
|
Other non-current liabilities
|
(36,387
|
)
|
|
(31,997
|
)
|
|
109,714
|
|
Net cash provided by (used in) operating activities
|
729,402
|
|
|
584,975
|
|
|
614,666
|
|
Cash flows from investing activities:
|
|
|
|
|
|
Payments for property, plant and equipment
|
(650,038
|
)
|
|
(537,975
|
)
|
|
(681,120
|
)
|
Proceeds from sale of property, plant and equipment
|
45,635
|
|
|
6,945
|
|
|
2,815
|
|
Proceeds from insurance recovery for property, plant and equipment
|
15,166
|
|
|
—
|
|
|
—
|
|
Acquisition of business, net of cash acquired
|
—
|
|
|
22,577
|
|
|
—
|
|
Investment in J-Devices
|
—
|
|
|
(12,908
|
)
|
|
—
|
|
Disposition of business to J-Devices, net of cash transferred
|
—
|
|
|
8,355
|
|
|
(15,774
|
)
|
Purchase of short-term investment
|
—
|
|
|
—
|
|
|
(20,000
|
)
|
Proceeds from short-term investment
|
—
|
|
|
—
|
|
|
20,000
|
|
Other investing activities
|
(190
|
)
|
|
(1,984
|
)
|
|
(510
|
)
|
Net cash provided by (used in) investing activities
|
(589,427
|
)
|
|
(514,990
|
)
|
|
(694,589
|
)
|
Cash flows from financing activities:
|
|
|
|
|
|
Borrowings under revolving credit facilities
|
125,000
|
|
|
290,000
|
|
|
—
|
|
Payments under revolving credit facilities
|
(255,000
|
)
|
|
(150,000
|
)
|
|
—
|
|
Borrowings under short-term debt
|
49,131
|
|
|
—
|
|
|
—
|
|
Payments of short-term debt
|
(49,500
|
)
|
|
—
|
|
|
—
|
|
Proceeds from issuance of long-term debt
|
46,000
|
|
|
400,000
|
|
|
80,000
|
|
Payments of long-term debt
|
(32,078
|
)
|
|
(530,000
|
)
|
|
(145,000
|
)
|
Payments for debt issuance costs
|
(156
|
)
|
|
(312
|
)
|
|
(903
|
)
|
Payments for retirement of debt
|
—
|
|
|
(7,030
|
)
|
|
(757
|
)
|
Payments for capital lease obligations
|
(2,543
|
)
|
|
—
|
|
|
—
|
|
Payment of deferred consideration for an acquisition
|
—
|
|
|
—
|
|
|
(18,763
|
)
|
Proceeds from issuance of stock through share-based compensation plans
|
8,247
|
|
|
931
|
|
|
6,250
|
|
Payments of tax withholding for restricted shares
|
(732
|
)
|
|
(730
|
)
|
|
(1,579
|
)
|
Payments of subsidiary dividends to noncontrolling interests
|
(548
|
)
|
|
(246
|
)
|
|
—
|
|
Net cash provided by (used in) financing activities
|
(112,179
|
)
|
|
2,613
|
|
|
(80,752
|
)
|
Effect of exchange rate fluctuations on cash, cash equivalents and restricted cash
|
351
|
|
|
—
|
|
|
68
|
|
Net increase (decrease) in cash, cash equivalents and restricted cash
|
28,147
|
|
|
72,598
|
|
|
(160,607
|
)
|
Cash, cash equivalents and restricted cash, beginning of period
|
527,348
|
|
|
454,750
|
|
|
615,357
|
|
Cash, cash equivalents and restricted cash, end of period
|
$
|
555,495
|
|
|
$
|
527,348
|
|
|
$
|
454,750
|
|
Supplemental disclosures of cash flow information:
|
|
|
|
|
|
|
|
|
Cash paid during the period for:
|
|
|
|
|
|
Interest
|
$
|
86,777
|
|
|
$
|
96,227
|
|
|
$
|
100,650
|
|
Income taxes
|
32,174
|
|
|
35,084
|
|
|
37,315
|
|
Non-cash investing and financing activities:
|
|
|
|
|
|
Property, plant and equipment included in capital expenditures payable
|
146,080
|
|
|
242,980
|
|
|
127,568
|
|
Equipment acquired through capital lease
|
6,358
|
|
|
—
|
|
|
—
|
|
Common stock issuance for conversion and exchange in 2014 of 6.0% convertible senior subordinated notes due April 2014
|
—
|
|
|
—
|
|
|
56,350
|
|
The accompanying notes are an integral part of these statements.
AMKOR TECHNOLOGY, INC.
Notes to Consolidated Financial Statements
|
|
1.
|
Description of Business and Summary of Significant Accounting Policies
|
Description of Business
Amkor is one of the world’s leading providers of outsourced semiconductor packaging and test services. Amkor pioneered the outsourcing of semiconductor packaging and test services through a predecessor corporation in 1968, and over the years we have built a leading position by:
|
|
•
|
Designing and developing innovative packaging and test technologies;
|
|
|
•
|
Offering a broad portfolio of cost-effective solutions and services;
|
|
|
•
|
Focusing on strategic end markets that offer solid growth potential;
|
|
|
•
|
Cultivating long-standing relationships with our customers, which include many of the world’s leading semiconductor companies;
|
|
|
•
|
Collaborating with customers, original equipment manufacturers ("OEMs") and equipment and material suppliers;
|
|
|
•
|
Developing a competitive cost structure with disciplined capital investment;
|
|
|
•
|
Building expertise in high-volume manufacturing processes and developing a reputation for high quality and solid execution and
|
|
|
•
|
Providing a geographically diverse operating base, with research and development, engineering support and production capabilities at various facilities throughout China, Japan, Korea, Malaysia, the Philippines and Taiwan.
|
Basis of Presentation
Our Consolidated Financial Statements include the accounts of Amkor Technology, Inc. and our subsidiaries (“Amkor”). Our Consolidated Financial Statements reflect the elimination of all significant inter-company accounts and transactions. On June 30, 2014, we completed the sale of our Japanese subsidiary to J-Devices (
Note 3
). The financial results of the divested entity were included in our Consolidated Financial Statements up to the date of sale and have subsequently been included in the results of J-Devices. On
December 30, 2015
, we increased our investment in J-Devices to
100%
(
Note 3
). As a result, our accounting for J-Devices changed from the equity method to the consolidation method effective December 30, 2015. The operating results of J-Devices were consolidated beginning in 2016. Our investments in variable interest entities in which we are the primary beneficiary are consolidated. We reflect the remaining portion of variable interest entities and foreign subsidiaries that are not wholly owned as noncontrolling interests.
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. On an ongoing basis, we evaluate our estimates, including those related to acquisitions, revenue recognition, income taxes, inventory, long lived assets and contingencies. These estimates are based on management’s best knowledge of current events, historical experience, actions that we may undertake in the future and on various other assumptions that are believed to be reasonable under the circumstances. As a result, actual results could differ materially from these estimates and assumptions.
Beginning with the year ended December 31, 2016, we changed the presentation of net sales by country in our segment footnote (
Note 18
) from customer location to customer headquarters location for all periods presented. The revision had no impact on net sales.
AMKOR TECHNOLOGY, INC.
Notes to Consolidated Financial Statements — (Continued)
Consolidation of Variable Interest Entities
We have variable interests in certain Philippine realty corporations in which we have a
40%
ownership. We lease land and buildings in the Philippines from these entities and we are the primary beneficiary of these arrangements. As of
December 31, 2016
, the combined book value of the assets and liabilities associated with these Philippine realty corporations included in our Consolidated Balance Sheet was
$16.8 million
and
$0.4 million
, respectively. The impact of consolidating these variable interest entities on our Consolidated Statements of Income was not significant, and other than our lease payments, we have not provided any significant assistance or other financial support to these variable interest entities for the years ended
December 31, 2016
,
2015
or
2014
. The creditors of the Philippine realty corporations have no recourse to our general credit.
Foreign Currency Translation
The U.S. dollar is the functional currency of our subsidiaries other than J-Devices, and the foreign currency asset and liability amounts at these subsidiaries are remeasured into U.S. dollars at end-of-period exchange rates, except for nonmonetary items which are remeasured at historical rates. Foreign currency income and expenses are remeasured at daily exchange rates, except for expenses related to balance sheet amounts which are remeasured at historical exchange rates. Exchange gains and losses arising from remeasurement of foreign currency-denominated monetary assets and liabilities are included in other (income) expense, net in the period in which they occur.
The Japanese Yen is the functional currency of J-Devices. The asset and liability amounts of J-Devices are translated into U.S. dollars at end-of-period exchange rates. Income and expenses are translated into U.S. dollars at average exchange rates in effect during the period. The resulting translation adjustments are reported as a component of accumulated other comprehensive income in the stockholders’ equity section of the balance sheet. Assets and liabilities denominated in a currency other than the functional currency are remeasured into the functional currency prior to translation into U.S. dollars, and the resulting transaction exchange gains or losses are included in other expense (income) in the period in which they occur.
Risks and Concentrations
The semiconductor industry is characterized by rapid technological change, competitive pricing pressures and cyclical market patterns. Our financial results are affected by a wide variety of factors, including general economic conditions worldwide, economic conditions specific to the semiconductor industry, the timely implementation of new package and test technologies, the ability to safeguard patents and intellectual property in a rapidly evolving market and reliance on materials and equipment suppliers. In addition, the semiconductor market has historically been cyclical and subject to significant economic downturns at various times. Our profitability and ability to generate cash from operations is principally dependent upon demand for semiconductors, the utilization of our capacity, semiconductor package mix, the average selling price of our services, our ability to manage our capital expenditures and our ability to control our costs including labor, material, overhead and financing costs.
A significant portion of our revenues is concentrated with a small group of customers (
Note 18
). The loss of a significant customer, a business combination among customers, a reduction in orders or decrease in price from a significant customer or disruption in any of our significant strategic partnerships or other commercial arrangements could have a material adverse effect on our business, liquidity, results of operations, financial condition and cash flows.
Financial instruments, for which we are subject to credit risk, consist principally of accounts receivable and cash and cash equivalents. With respect to accounts receivable, we mitigate our credit risk by selling primarily to well-established companies, performing ongoing credit evaluations and making frequent contact with customers. In addition, we may utilize non-recourse factoring to mitigate credit risk when considered appropriate. We have historically mitigated our credit risk with respect to cash and cash equivalents through diversification of our holdings into various high quality money market funds and bank deposit accounts. At
December 31, 2016
, our cash and cash equivalents were maintained in various U.S. and foreign bank operating and time deposit accounts and invested in U.S. money market funds.
AMKOR TECHNOLOGY, INC.
Notes to Consolidated Financial Statements — (Continued)
Contingencies and Litigation
We may be subject to certain legal proceedings, lawsuits and other claims, as discussed in
Note 17
. We accrue for a loss contingency, including legal proceedings, lawsuits, pending claims and other legal matters, when we conclude that the likelihood of a loss is probable and the amount of the loss can be reasonably estimated. When the reasonable estimate of the loss is within a range of amounts, and no amount in the range constitutes a better estimate than any other amount, we accrue for the amount at the low end of the range. We adjust our accruals from time to time as we receive additional information, but the loss we incur may be significantly greater than or less than the amount we have accrued. We disclose loss contingencies if we believe they are material and there is at least a reasonable possibility that a loss has been incurred. Attorney fees related to legal matters are expensed as incurred.
Cash and Cash Equivalents
We consider all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Our cash and cash equivalents are maintained in various U.S. and foreign bank operating and time deposit accounts and invested in U.S. money market funds.
Restricted Cash
Restricted cash, current, consists of short-term cash equivalents used to collateralize our daily banking services. Restricted cash, non-current, mainly consists of collateral to fulfill foreign trade compliance requirements.
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within our Consolidated Balance Sheets to our Consolidated Statements of Cash Flows.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2016
|
|
2015
|
|
2014
|
|
2013
|
|
(In thousands)
|
Cash and cash equivalents
|
$
|
549,518
|
|
|
$
|
523,172
|
|
|
$
|
449,946
|
|
|
$
|
610,442
|
|
Restricted cash - current
|
2,000
|
|
|
2,000
|
|
|
2,681
|
|
|
2,681
|
|
Restricted cash - non-current
|
3,977
|
|
|
2,176
|
|
|
2,123
|
|
|
2,234
|
|
Total cash, cash equivalents and restricted cash
|
$
|
555,495
|
|
|
$
|
527,348
|
|
|
$
|
454,750
|
|
|
$
|
615,357
|
|
Inventories
Inventories are stated at the lower of cost or market (net realizable value). Cost is principally determined by standard cost or the weighted moving average method, both of which approximate actual cost. We review and set our standard costs as needed, but at a minimum on an annual basis. We reduce the carrying value of our inventories for the cost of inventory we estimate is excess and obsolete based on the age of our inventories. When a determination is made that the inventory will not be utilized in production or is not saleable, it is written-off.
Other Current Assets
Other current assets consist principally of prepaid assets and an investment in government securities by a foreign subsidiary to satisfy local regulatory requirements, which is recorded at amortized cost.
AMKOR TECHNOLOGY, INC.
Notes to Consolidated Financial Statements — (Continued)
Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation is calculated by the straight-line method over the estimated useful lives of depreciable assets which are as follows:
|
|
|
Land use rights
|
50 to 90 years
|
Buildings and improvements
|
10 to 40 years
|
Machinery and equipment
|
2 to 7 years
|
Software and computer equipment
|
3 to 5 years
|
Furniture, fixtures and other equipment
|
4 to 10 years
|
Cost and accumulated depreciation for property retired or disposed of are removed from the accounts, and any resulting gain or loss is included in earnings. Expenditures for maintenance and repairs are charged to expense as incurred.
We review long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Recoverability of a long-lived asset group to be held and used in operations is measured by a comparison of the carrying amount to the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset group. If such asset group is considered to be impaired, the impairment loss is measured as the amount by which the carrying amount of the asset group exceeds its fair value. Long-lived assets to be disposed of are carried at the lower of cost or fair value less the costs of disposal.
Goodwill
Goodwill is recorded when the cost of an acquisition exceeds the fair value of the net tangible and identifiable intangible assets acquired. We review goodwill for impairment annually during the fourth quarter of each year and whenever events or changes in circumstances indicate that an impairment may exist. Impairment losses are recorded when the carrying amount of goodwill exceeds its implied fair value.
Other Assets
Other assets consist principally of deferred tax assets and refundable security deposits.
Other Non-current Liabilities
Other non-current liabilities consist primarily of liabilities associated with the settlement of patent license litigation and uncertain income tax positions.
See Note 17
for additional information on the settlement.
Fair Value Measurements
We apply fair value accounting for assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring or nonrecurring basis. We define fair value as the price that would be received from selling an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. See
Note 16
for further discussion of fair value measurements.
AMKOR TECHNOLOGY, INC.
Notes to Consolidated Financial Statements — (Continued)
Revenue Recognition
We recognize revenue from our packaging and test services, net of value-added or other similar taxes, when there is evidence of an arrangement, delivery has occurred or services have been rendered, fees are fixed or determinable and collectibility is reasonably assured. Generally, these criteria are met and revenue is recognized upon shipment or, in some cases, customer acceptance. If the revenue recognition criteria are not met, we defer the revenue. Deferred revenue generally results from two types of transactions: contractual invoicing at interim points in the packaging and test process prior to shipment of the finished product and customer advances for supply agreements with customers where we commit capacity in exchange for customer prepayment of services. These prepayments are deferred and recorded as customer advances within accrued expenses and other non-current liabilities.
We generally do not take ownership of customer-supplied semiconductor wafers. Title and risk of loss remains with the customer for these materials at all times. Accordingly, the cost of the customer-supplied materials is not included in our Consolidated Financial Statements.
An allowance for sales credits is recorded as a reduction to sales and accounts receivable during the period of sale such that accounts receivable is reported at its estimated net realizable value. The allowance for sales credits is an estimate of the future credits we will issue for billing adjustments primarily for invoicing corrections and miscellaneous customer claims and is estimated based upon recent credit issuance, historical experience and specific identification of known or expected sales credits at the end of the reporting period. Additionally, provisions are made for doubtful accounts when there is doubt as to the collectibility of accounts receivable. The allowance for doubtful accounts is recorded as bad debt expense and is classified as selling, general and administrative expense. The allowance for doubtful accounts is based upon specific identification of doubtful accounts considering the age of the receivable balance, the customer’s historical payment history and current credit worthiness as well as specific identification of any known or expected collectibility issues. Historically, our allowance for doubtful accounts has been immaterial.
Shipping and Handling Fees and Costs
Amounts billed to customers for shipping and handling are presented in net sales. Costs incurred for shipping and handling are included in cost of sales.
Research and Development Costs
Research and development expenses include costs attributable to the conduct of research and development programs primarily related to the development of new package designs or technologies and improving the efficiency and capabilities of our existing production processes. Such costs include salaries, payroll taxes, employee benefit costs, materials, supplies, depreciation and maintenance of research equipment, services provided by outside contractors and the allocable portions of facility costs such as rent, utilities, insurance, repairs and maintenance, depreciation and general support services. All costs associated with research and development are expensed as incurred.
Income Taxes
Income taxes are accounted for using the asset and liability method. Under this method, deferred income tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis as well as for net operating loss and tax credit carryforwards. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which these temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is provided for those deferred tax assets for which it is more likely than not that the related tax benefits will not be realized.
We monitor on an ongoing basis our ability to utilize our deferred tax assets and whether there is a need for a related valuation allowance. In evaluating our ability to recover our deferred tax assets in the jurisdictions from which they arise, we consider
AMKOR TECHNOLOGY, INC.
Notes to Consolidated Financial Statements — (Continued)
all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax-planning strategies and results of recent operations. For most of our foreign deferred tax assets, we consider it more likely than not that we will have sufficient taxable income to allow us to realize these deferred tax assets. However, in the event taxable income falls short of current expectations, we may need to establish a valuation allowance against such deferred tax assets.
We recognize in our Consolidated Financial Statements the impact of an income tax position, if that position is more likely than not of being sustained on audit, based on the technical merits of the position. Related interest and penalties are classified as income taxes in the financial statements. See
Note 6
for more information regarding unrecognized income tax benefits.
Revision to Previously Reported Financial Information
In the second quarter of 2016, we identified an error in the provision for income taxes in the financial statements for J-Devices for the periods beginning in 2012 through the fourth quarter of 2015. We believe that the error is not material to Amkor for the periods impacted and have elected to revise our previously issued consolidated financial statements. Periods presented herein are based on the revised financial results. See
Note 19
for additional information.
|
|
2.
|
New Accounting Standards
|
Recently Adopted Standards
In April 2015, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2015-03,
Interest-Imputation of Interest (Subtopic 835-30) - Simplifying the Presentation of Debt Issuance Costs
. ASU 2015-03 requires debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. In August 2015, the FASB issued ASU 2015-15,
Interest - Imputation of Interest (Subtopic 835-30): Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements - Amendments to SEC Paragraphs Pursuant to Staff Announcement at June 18, 2015 EITF Meeting (SEC Update)
, which clarifies that companies may continue to present unamortized debt issuance costs associated with line of credit arrangements as an asset. ASU 2015-03 and ASU 2015-15 are effective for interim and annual reporting periods beginning after December 15, 2015, and require retrospective application. We adopted ASU 2015-03 and ASU 2015-15 on January 1, 2016. The guidance was applied retrospectively and the consolidated balance sheet as of December 31, 2015 was adjusted to reclassify
$8.8 million
of debt issuance costs from other assets to a reduction in the carrying amount of the related debt liability.
In March 2016, the FASB issued ASU 2016-09,
Compensation - Stock Compensation (Topic 718) - Improvements to Employee Share-Based Payment Accounting
. ASU 2016-09 involves several aspects of the accounting for share-based transactions, including income tax consequences, classification of awards as either equity or liabilities, forfeitures and classification on the statement of cash flows. ASU 2016-09 is effective for reporting periods beginning after December 15, 2016 and early adoption is permitted. We adopted ASU 2016-09 on July 1, 2016. The adoption of ASU 2016-09 did not have a significant impact on our financial statements or disclosure.
In August 2016, the FASB issued ASU 2016-15,
Statement of Cash Flows (Topic 230) - Classification of Certain Cash Receipts and Cash Payments
. ASU 2016-15 provides guidance on eight specific cash flow issues with the objective of reducing diversity in practice in regard to how cash receipts and cash payments are presented and classified in the statement of cash flows. ASU 2016-15 is effective for reporting periods beginning after December 15, 2017 and is applied retrospectively. Early adoption is permitted. We adopted ASU 2016-15 at September 30, 2016. The guidance was applied retrospectively and the consolidated statement of cash flows for the years ended December 31, 2015 and 2014 was adjusted to reclassify
$7.0 million
and
$0.8 million
, respectively, of payments for debt retirement from operating activities to financing activities.
In November 2016, the FASB issued ASU 2016-18,
Statement of Cash Flows (Topic 230) - Restricted Cash
. ASU 2016-18 requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as
AMKOR TECHNOLOGY, INC.
Notes to Consolidated Financial Statements — (Continued)
restricted cash should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. ASU 2016-18 is effective for reporting periods beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted. We adopted ASU 2016-18 at December 31, 2016. The guidance was applied retrospectively. The adoption of ASU 2016-18 did not have a significant impact on our cash flows. See Note 1 for a reconciliation of cash, cash equivalents and restricted cash reported within our Consolidated Balance Sheets to our Consolidated Statements of Cash Flows.
Recently Issued Standards
In May 2014, the FASB issued ASU 2014-09,
Revenue from Contracts with Customers (Topic 606)
. ASU 2014-09 is based on the principle that revenue is recognized to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers, including significant judgments and changes in judgments. ASU 2014-09 permits the use of either full retrospective or modified retrospective methods of adoption. In August 2015, the FASB issued ASU 2015-14,
Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date
, which defers the effective date by one year to December 15, 2017,
for interim and annual reporting periods beginning after that date
. In March, April, May and December 2016, the FASB issued ASU 2016-08
,
ASU 2016-10, ASU 2016-12 and ASU 2016-20, respectively, which provide supplemental guidance and clarification to ASU 2014-09. Early adoption is permitted, but not before the original effective date of December 15, 2016. We do not plan to adopt this standard early. We are currently evaluating the impact that this guidance will have on our financial statements and disclosure and have not yet selected a transition method.
In July 2015, the FASB issued ASU 2015-11,
Inventory - Simplifying the Measurement of Inventory (Topic 330)
. ASU 2015-11 requires inventory to be subsequently measured using the lower of cost and net realizable value, thereby eliminating the market value approach. Net realizable value is defined as the “estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation.” ASU 2015-11 is effective for reporting periods beginning after December 15, 2016 and is applied prospectively. Early adoption is permitted. ASU 2015-11 is not expected to have a significant impact on our financial statements or disclosure.
In February 2016, the FASB issued ASU 2016-02,
Leases (Topic 842)
. ASU 2016-02 requires a dual approach for lessee accounting under which a lessee would account for leases as finance leases or operating leases. Both finance leases and operating leases will result in the lessee recognizing a right-of-use asset and a corresponding lease liability. For finance leases the lessee would recognize interest expense and amortization of the right-of-use asset, and for operating leases the lessee would recognize a straight-line lease expense. ASU 2016-02 is effective for reporting periods beginning after December 15, 2018 using a modified retrospective approach. Early adoption is permitted. We are currently evaluating the impact that this guidance may have on our financial statements and disclosure.
In January 2017, the FASB issued ASU 2017-04,
Intangible - Goodwill and Other (Topic 350) - Simplifying the Test for Goodwill Impairment
. ASU 2017-04 simplifies the goodwill impairment test by eliminating the second step of the current two-step impairment test. ASU 2017-04 is effective for interim and annual goodwill impairment tests in fiscal years beginning after December 15, 2019 and is applied prospectively. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. ASU 2017-04 may affect our financial statements to the extent that a goodwill impairment test results in impairment charges.
In February 2017, the FASB issued ASU 2017-05,
Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets
. ASU 2017-05 clarifies the scope of ASC Subtopic 610-20 and provides guidance for partial sales of nonfinancial assets. ASU 2017-05 is effective for reporting periods beginning after December 15, 2017 and permits the use of either retrospective or modified retrospective methods of adoption. In addition, an entity is required to apply the amendments in this update at the same time that it applies the amendments in ASU 2014-09. We are currently evaluating the impact that this guidance will have on our financial statements and disclosure.
AMKOR TECHNOLOGY, INC.
Notes to Consolidated Financial Statements — (Continued)
|
|
3.
|
Acquisition and Divestiture
|
Step-acquisition of J-Devices
On December 30, 2015, through the exercise of additional options, we increased our ownership interest in J-Devices from
65.7%
to
100%
for a purchase price of
$105.4 million
. As a result, our accounting for J-Devices changed from the equity method to the consolidation method effective December 30, 2015. The operating results of J-Devices were consolidated beginning in 2016. 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. 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.
During the three months ended June 30, 2016, we updated the purchase price allocation of J-Devices for a previously unrecognized tax provision liability at J-Devices of
$11.6 million
. We also revised the loss from the release of accumulated foreign currency translation adjustments, the combined net loss and the pro forma information disclosed below. See
Note 1
and
Note 19
for additional information.
The following table presents the initial purchase price allocation and subsequent adjustments to the consideration transferred to acquire J-Devices and the amounts of identifiable assets acquired and liabilities assumed at the acquisition date:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Initial Allocation
|
|
Adjustments
|
|
Revised Allocation
|
|
(In thousands)
|
Fair value of consideration transferred:
|
|
|
|
|
|
Cash
|
$
|
105,391
|
|
|
$
|
—
|
|
|
$
|
105,391
|
|
Fair value of our previously held equity interest in J-Devices
|
167,684
|
|
|
(7,597
|
)
|
|
160,087
|
|
Total
|
$
|
273,075
|
|
|
$
|
(7,597
|
)
|
|
$
|
265,478
|
|
|
|
|
|
|
|
Recognized amounts of identifiable assets acquired and liabilities assumed:
|
|
|
|
|
|
Cash
|
$
|
127,968
|
|
|
$
|
—
|
|
|
$
|
127,968
|
|
Accounts receivable
|
180,177
|
|
|
—
|
|
|
180,177
|
|
Inventory
|
42,502
|
|
|
—
|
|
|
42,502
|
|
Other current assets
|
2,363
|
|
|
—
|
|
|
2,363
|
|
Property, plant and equipment
|
230,319
|
|
|
—
|
|
|
230,319
|
|
Other assets
|
9,268
|
|
|
—
|
|
|
9,268
|
|
Short-term borrowings and current portion of long-term debt
|
(36,770
|
)
|
|
—
|
|
|
(36,770
|
)
|
Other current liabilities
|
(251,405
|
)
|
|
—
|
|
|
(251,405
|
)
|
Long-term debt
|
(18,885
|
)
|
|
—
|
|
|
(18,885
|
)
|
Pension obligations
|
(22,250
|
)
|
|
—
|
|
|
(22,250
|
)
|
Other non-current liabilities
|
(9,655
|
)
|
|
(11,563
|
)
|
|
(21,218
|
)
|
Total identifiable net assets
|
253,632
|
|
|
(11,563
|
)
|
|
242,069
|
|
Goodwill
|
19,443
|
|
|
3,966
|
|
|
23,409
|
|
Total
|
$
|
273,075
|
|
|
$
|
(7,597
|
)
|
|
$
|
265,478
|
|
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.
AMKOR TECHNOLOGY, INC.
Notes to Consolidated Financial Statements — (Continued)
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
$29.6 million
(
Note 15
). The combined net loss of
$13.5 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 measurement. 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 nonrecurring 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
$13.5 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
|
88,190
|
|
|
153,049
|
|
Net income attributable to Amkor
|
85,394
|
|
|
149,548
|
|
Basic earnings per share
|
0.36
|
|
|
0.65
|
|
Diluted earnings per share
|
0.36
|
|
|
0.63
|
|
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
.
AMKOR TECHNOLOGY, INC.
Notes to Consolidated Financial Statements — (Continued)
|
|
4.
|
Share-Based Compensation Plans
|
Our share-based compensation is measured at fair value and expensed over the service period (generally the vesting period). The amount of compensation expense to be recognized is adjusted for an estimated forfeiture rate which is based on historical data. For the years ended
December 31, 2016
, 2015 and 2014, we recognized share-based compensation attributable to stock options and restricted shares of
$3.3 million
,
$3.9 million
and
$3.7 million
, respectively, primarily in selling, general and administrative expenses. There were no corresponding deferred income tax benefits for stock options or restricted shares.
Equity Incentive Plan
Amended and Restated 2007 Equity Incentive Plan.
The Amended and Restated 2007 Equity Incentive Plan, (the “2007 Plan”) provides for the grant of the following types of incentive awards: (i) stock options, (ii) restricted stock, (iii) restricted stock units, (iv) stock appreciation rights, (v) performance units and performance shares and (vi) other stock or cash awards. Those eligible for awards include employees, directors and consultants who provide services to Amkor and its subsidiaries. The 2007 Plan is effective through 2022 and can be terminated at the discretion of the Board of Directors. There were originally
17.0 million
shares of our common stock reserved for issuance under the 2007 Plan and at
December 31, 2016
there were
11.0 million
shares available for grant.
Stock options
Stock options are generally granted with an exercise price equal to the market price of the stock at the date of grant. Substantially all of the options granted are exercisable pursuant to a
one
to
four
year vesting schedule and the term of the options granted is no longer than
ten
years. Upon option exercise, we may issue new shares of common or treasury stock.
In order to calculate the fair value of stock options at the date of grant, we use the Black-Scholes option pricing model. Expected volatilities are based on historical performance of our stock. We also use historical data to estimate the timing and amount of option exercises and forfeitures within the valuation model. The expected term of the options is based on evaluations of historical and expected future employee exercise behavior and represents the period of time that options granted are expected to be outstanding. The risk-free interest rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant.
The following table summarizes our stock option activity for the year ended
December 31, 2016
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
Shares
(In thousands)
|
|
Weighted-Average
Exercise Price
per Share
|
|
Weighted-Average
Remaining
Contractual Term
(Years)
|
|
Aggregate
Intrinsic
Value
(In thousands)
|
Outstanding at December 31, 2015
|
3,727
|
|
$
|
6.49
|
|
|
|
|
|
Granted
|
460
|
|
6.08
|
|
|
|
|
|
Exercised
|
(1,470)
|
|
5.61
|
|
|
|
|
|
Forfeited or expired
|
(274)
|
|
6.63
|
|
|
|
|
|
Outstanding at December 31, 2016
|
2,443
|
|
$
|
6.93
|
|
|
5.99
|
|
$
|
9,174
|
|
Fully vested at December 31, 2016 and expected to vest thereafter
|
2,416
|
|
$
|
6.94
|
|
|
5.96
|
|
$
|
9,066
|
|
Exercisable at December 31, 2016
|
1,531
|
|
$
|
7.53
|
|
|
4.57
|
|
$
|
4,963
|
|
AMKOR TECHNOLOGY, INC.
Notes to Consolidated Financial Statements — (Continued)
The following assumptions were used to calculate the weighted-average fair values of the options granted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
2016
|
|
2015
|
|
2014
|
Expected life (in years)
|
6.5
|
|
|
5.8
|
|
|
6.1
|
|
Risk-free interest rate
|
1.5
|
%
|
|
1.8
|
%
|
|
2.0
|
%
|
Volatility
|
48
|
%
|
|
45
|
%
|
|
57
|
%
|
Dividend yield
|
—
|
|
|
—
|
|
|
—
|
|
Weighted-average grant date fair value per option granted
|
$
|
2.89
|
|
|
$
|
3.14
|
|
|
$
|
4.46
|
|
Total unrecognized compensation expense from stock options was
$2.0 million
as of
December 31, 2016
, which is expected to be recognized over a weighted-average period of approximately
1.9
years beginning January 1, 2017.
Restricted Shares
We grant restricted shares to directors and employees under the 2007 Plan. Restricted shares granted to directors vest on the earlier of the
one
year anniversary of the grant date or the date of the next annual meeting of stockholders. All other restricted shares vest ratably over
four
years, with
25%
of the shares vesting at the end of the first year and the remainder vesting quarterly thereafter such that
100%
of the shares will become vested on the fourth anniversary of the award, subject to the recipient’s continued employment with us on the applicable vesting dates. In addition, provided that the restricted shares have not been forfeited earlier, for certain grants, the restricted shares will vest upon the recipient’s death or disability, or upon a change in control of Amkor. The value of the restricted shares is determined based on the fair market value of the underlying shares on the date of the grant and is recognized ratably over the vesting period. Upon vesting of restricted stock awards, we may issue new shares of common or treasury stock.
The following table summarizes our restricted share activity for the year ended
December 31, 2016
:
|
|
|
|
|
|
|
|
|
Number of
Shares
(In thousands)
|
|
Weighted- average
Grant Date
Fair Value
(Per Share)
|
Nonvested at December 31, 2015
|
385
|
|
|
$
|
4.78
|
|
Awards granted
|
50
|
|
|
5.66
|
|
Awards vested
|
(285
|
)
|
|
4.82
|
|
Awards forfeited
|
(5
|
)
|
|
4.43
|
|
Nonvested at December 31, 2016
|
145
|
|
|
$
|
5.02
|
|
Total unrecognized compensation cost from restricted shares was
$0.4 million
as of
December 31, 2016
, which is expected to be recognized over a weighted-average period of approximately
0.4
years beginning January 1, 2017.
AMKOR TECHNOLOGY, INC.
Notes to Consolidated Financial Statements — (Continued)
|
|
5.
|
Other Income and Expense
|
Other income and expense consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
2016
|
|
2015
|
|
2014
|
|
(In thousands)
|
Interest income
|
$
|
(1,326
|
)
|
|
$
|
(2,539
|
)
|
|
$
|
(3,359
|
)
|
Foreign currency (gain) loss, net
|
(3,592
|
)
|
|
(7,849
|
)
|
|
(9,808
|
)
|
Loss on debt retirement
|
—
|
|
|
9,560
|
|
|
757
|
|
Loss from acquisition of J-Devices (Note 3)
|
—
|
|
|
13,501
|
|
|
—
|
|
Gain on sale of subsidiary to J-Devices (Note 3)
|
—
|
|
|
—
|
|
|
(9,155
|
)
|
Other (income) expense, net
|
(936
|
)
|
|
(2,122
|
)
|
|
(2,978
|
)
|
Total other (income) expense, net
|
$
|
(5,854
|
)
|
|
$
|
10,551
|
|
|
$
|
(24,543
|
)
|
Geographic sources of income (loss) before income taxes are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
2016
|
|
2015
|
|
2014
|
|
(In thousands)
|
United States
|
$
|
(12,385
|
)
|
|
$
|
(39,684
|
)
|
|
$
|
16,571
|
|
Foreign
|
227,542
|
|
|
107,596
|
|
|
119,507
|
|
Total income before income taxes
|
$
|
215,157
|
|
|
$
|
67,912
|
|
|
$
|
136,078
|
|
The provision for income taxes includes current federal, state and foreign taxes payable and those deferred because of temporary differences between the financial statement and the tax bases of assets and liabilities.
The components of the provision (benefit) for income taxes are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
2016
|
|
2015
|
|
2014
|
|
(In thousands)
|
Current
|
|
|
|
|
|
Federal
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
State
|
22
|
|
|
11
|
|
|
(46
|
)
|
Foreign
|
49,577
|
|
|
28,721
|
|
|
51,081
|
|
|
49,599
|
|
|
28,732
|
|
|
51,035
|
|
Deferred
|
|
|
|
|
|
Federal
|
—
|
|
|
—
|
|
|
—
|
|
State
|
—
|
|
|
—
|
|
|
—
|
|
Foreign
|
(1,746
|
)
|
|
(697
|
)
|
|
(17,190
|
)
|
|
(1,746
|
)
|
|
(697
|
)
|
|
(17,190
|
)
|
Total provision
|
$
|
47,853
|
|
|
$
|
28,035
|
|
|
$
|
33,845
|
|
AMKOR TECHNOLOGY, INC.
Notes to Consolidated Financial Statements — (Continued)
The reconciliation between the U.S. federal statutory income tax rate of
35%
and our income tax provision is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
2016
|
|
2015
|
|
2014
|
|
(In thousands)
|
U.S. federal tax at 35%
|
$
|
75,305
|
|
|
$
|
23,769
|
|
|
$
|
47,627
|
|
State taxes, net of federal benefit
|
836
|
|
|
2,622
|
|
|
1,940
|
|
Foreign income taxed at different rates
|
(17,907
|
)
|
|
(11,756
|
)
|
|
6,579
|
|
Foreign exchange (loss) gain
|
(1,127
|
)
|
|
(5,680
|
)
|
|
(17,321
|
)
|
Change in valuation allowance
|
(7,362
|
)
|
|
18,259
|
|
|
(13,527
|
)
|
Adjustments related to prior years
|
(2,648
|
)
|
|
(912
|
)
|
|
3,643
|
|
Income tax credits generated
|
(40,301
|
)
|
|
(1,919
|
)
|
|
(2,557
|
)
|
Repatriation of foreign earnings and profits
|
25,604
|
|
|
91
|
|
|
3,958
|
|
Expiration of net operating losses and credits
|
15,092
|
|
|
74
|
|
|
2,534
|
|
Non-deductible loss on acquisition of J-Devices (Note 3)
|
—
|
|
|
4,725
|
|
|
—
|
|
Other
|
361
|
|
|
(1,238
|
)
|
|
969
|
|
Total
|
$
|
47,853
|
|
|
$
|
28,035
|
|
|
$
|
33,845
|
|
The change in valuation allowance for 2016, 2015 and 2014 is primarily the result of changes in net operating loss and tax credit carryforwards for which no tax expense or benefit has been recognized. In 2016, we recognized taxable income and associated foreign income tax credits from the repatriation of current year foreign earnings and profits in connection with the merger of our Japanese subsidiaries. In 2015, we recognized a loss in connection with our increased ownership interest in J-Devices which is not deductible for income tax purposes. The 2014 change in foreign income taxed at different rates was due to a change in the geographic income mix which resulted in a lower tax benefit.
AMKOR TECHNOLOGY, INC.
Notes to Consolidated Financial Statements — (Continued)
The following is a summary of the components of our deferred tax assets and liabilities:
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2016
|
|
2015
|
|
(In thousands)
|
Deferred tax assets:
|
|
|
|
Net operating loss carryforwards
|
$
|
111,899
|
|
|
$
|
147,056
|
|
Income tax credits
|
41,900
|
|
|
27,212
|
|
Property, plant and equipment
|
21,860
|
|
|
21,921
|
|
Accrued liabilities
|
68,563
|
|
|
62,016
|
|
Unrealized foreign exchange loss
|
531
|
|
|
869
|
|
Other
|
14,583
|
|
|
16,659
|
|
Total deferred tax assets
|
259,336
|
|
|
275,733
|
|
Valuation allowance
|
(165,367
|
)
|
|
(168,105
|
)
|
Total deferred tax assets net of valuation allowance
|
93,969
|
|
|
107,628
|
|
Deferred tax liabilities:
|
|
|
|
Property, plant and equipment
|
20,407
|
|
|
31,345
|
|
Deferred gain
|
2,655
|
|
|
3,716
|
|
Other
|
5,826
|
|
|
6,713
|
|
Total deferred tax liabilities
|
28,888
|
|
|
41,774
|
|
Net deferred tax assets
|
$
|
65,081
|
|
|
$
|
65,854
|
|
Recognized as:
|
|
|
|
Other assets
|
66,831
|
|
|
70,784
|
|
Other non-current liabilities
|
(1,750
|
)
|
|
(4,930
|
)
|
Total
|
$
|
65,081
|
|
|
$
|
65,854
|
|
As a result of certain income tax accounting realization requirements with respect to accounting for share-based compensation, the table of deferred tax assets and liabilities does not include
$4.6 million
of deferred tax assets as of December 31, 2015 that arose directly from tax deductions related to equity compensation greater than compensation recognized for financial reporting. As a result of the adoption of ASU 2016-09 on July 1, 2016, deferred tax assets now include the impact of tax deductions related to equity compensation greater than compensation recognized for financial reporting.
As a result of certain capital investments, export commitments and employment levels, income from operations in Korea, Malaysia, the Philippines and Taiwan was subject to reduced income tax rates and, in some cases, was exempt from income taxes. The reduced tax rates or tax exemptions expire at various dates through
2025
. We recognized
$5.6 million
,
$3.3 million
and
$0.9 million
in tax benefits as a result of the tax holidays in
2016
,
2015
and
2014
, respectively. The benefit of the tax holidays on diluted earnings per share was approximately
$0.02
,
$0.01
and
$0.00
for
2016
,
2015
and
2014
, respectively.
AMKOR TECHNOLOGY, INC.
Notes to Consolidated Financial Statements — (Continued)
Our net operating loss carryforwards (“NOL’s”) are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2016
|
|
2015
|
|
Expiration
|
|
(In thousands)
|
|
|
U.S. Federal NOL’s
|
$
|
292,715
|
|
|
$
|
363,648
|
|
|
2021-2036
|
U.S. State NOL’s
|
138,218
|
|
|
182,420
|
|
|
2017-2036
|
Foreign NOL’s
|
3,378
|
|
|
64,999
|
|
|
2017-2025
|
We monitor on an ongoing basis our ability to utilize our deferred tax assets and whether there is a need for a related valuation allowance. In evaluating our ability to recover our deferred tax assets in the jurisdictions from which they arise, we consider all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax-planning strategies and results of recent operations. For most of our foreign deferred tax assets, we consider it more likely than not that we will have sufficient taxable income to allow us to realize these deferred tax assets.
The deferred tax assets associated with our U.S. federal and state net operating losses available for carryforward have been fully reserved with valuation allowances at December 31,
2016
and
2015
. Also, our ability to utilize our U.S. net operating loss carryforwards may be limited in the future if we experience an ownership change as defined by the Internal Revenue Code.
At
December 31, 2016
, we have various tax credits available to be carried forward including U.S. foreign income tax credits totaling
$31.5 million
which expire in 2026. The deferred tax assets associated with the U.S. foreign income tax credits have been fully reserved with a valuation allowance. Income tax credits generated by certain of our foreign subsidiaries in
2016
,
2015
and
2014
have been recognized in our income tax provision.
Income taxes have not been provided on approximately
$917.0 million
of the undistributed earnings of our foreign subsidiaries at
December 31, 2016
, over which we have sufficient influence to control the distribution of such earnings and have determined that substantially all such earnings have been reinvested indefinitely. These earnings could become subject to either or both U.S. federal income tax and foreign withholding tax if they are remitted as dividends, if foreign earnings are loaned to any of our domestic companies, or if we sell our investment in certain subsidiaries. We estimate that repatriation of these foreign earnings would generate withholding taxes and income taxes of approximately
$42.1 million
.
We operate in and file income tax returns in various U.S. and foreign jurisdictions which are subject to examination by tax authorities. We have tax returns that are open to examination in various jurisdictions for tax years 2010-2016. The open years contain matters that could be subject to differing interpretations of applicable tax laws and regulations related to the amount and/or timing of income, deductions and tax credits. There can be no assurance that the outcome of examinations will be favorable. Our unrecognized tax benefits are subject to change as examinations of specific tax years are completed in the respective jurisdictions. Current examinations include our 2012 and 2013 Philippine income tax returns and 2010-2014 Malaysian income tax returns.
AMKOR TECHNOLOGY, INC.
Notes to Consolidated Financial Statements — (Continued)
A reconciliation of the beginning and ending gross amount of unrecognized tax benefits is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
2016
|
|
2015
|
|
2014
|
|
(In thousands)
|
Balance at January 1
|
$
|
23,332
|
|
|
$
|
12,670
|
|
|
$
|
27,128
|
|
Additions based on tax positions related to the current year
|
1,822
|
|
|
12,727
|
|
|
6,032
|
|
Additions for tax positions of prior years
|
689
|
|
|
3,341
|
|
|
1,240
|
|
Reductions for tax positions of prior years
|
(2,589
|
)
|
|
(4,815
|
)
|
|
(15,433
|
)
|
Reductions related to settlements with tax authorities
|
—
|
|
|
—
|
|
|
(6,297
|
)
|
Reductions from lapse of statutes of limitations
|
(105
|
)
|
|
(591
|
)
|
|
—
|
|
Balance at December 31
|
$
|
23,149
|
|
|
$
|
23,332
|
|
|
$
|
12,670
|
|
The net decrease in our unrecognized tax benefits was
$0.2 million
from
December 31, 2015
to
December 31, 2016
. Our unrecognized tax benefits decreased by
$2.0 million
as a result of the positive ruling on the tax treatment of an expense. The decrease was offset by increases primarily related to income attribution and income characterization. At
December 31, 2016
, all of our gross unrecognized tax benefits would reduce our effective tax rate, if recognized.
The liability related to our unrecognized tax benefits is
$21.3 million
as of
December 31, 2016
, and is reported as a component of other non-current liabilities. The unrecognized tax benefits presented in the table above include positions that have reduced deferred tax assets, which are not included in the liability reported as a component of other non-current liabilities. The balance of accrued and unpaid interest and penalties is
$2.5 million
as of
December 31, 2016
and is included as a component in other non-current liabilities in connection with our unrecognized tax benefits.
AMKOR TECHNOLOGY, INC.
Notes to Consolidated Financial Statements — (Continued)
Basic earnings per share (“EPS”) is computed by dividing net income attributable to Amkor common stockholders by the weighted-average number of common shares outstanding during the period. The weighted-average number of common shares outstanding includes restricted shares held by retirement eligible recipients and is reduced for treasury stock.
Diluted EPS is computed on the basis of the weighted-average number of shares of common stock plus the effect of dilutive potential common shares outstanding during the period. Dilutive potential common shares include outstanding stock options, unvested restricted shares and convertible debt. The following table summarizes the computation of basic and diluted EPS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
2016
|
|
2015
|
|
2014
|
|
(In thousands, except per share data)
|
Net income attributable to Amkor
|
$
|
164,190
|
|
|
$
|
51,098
|
|
|
$
|
129,739
|
|
Income allocated to participating securities
|
—
|
|
|
(59
|
)
|
|
(370
|
)
|
Net income available to Amkor common stockholders — basic
|
164,190
|
|
|
51,039
|
|
|
129,369
|
|
Adjustment for dilutive securities on net income:
|
|
|
|
|
|
Net income reallocated to participating securities
|
—
|
|
|
—
|
|
|
6
|
|
Interest on 6.0% convertible notes due 2014, net of tax
|
—
|
|
|
—
|
|
|
1,039
|
|
Net income attributable to Amkor — diluted
|
$
|
164,190
|
|
|
$
|
51,039
|
|
|
$
|
130,414
|
|
|
|
|
|
|
|
Weighted-average shares outstanding — basic
|
237,416
|
|
|
236,850
|
|
|
230,710
|
|
Effect of dilutive securities:
|
|
|
|
|
|
Stock options and restricted share awards
|
618
|
|
|
320
|
|
|
712
|
|
6.0% convertible notes due 2014
|
—
|
|
|
—
|
|
|
5,309
|
|
Weighted-average shares outstanding — diluted
|
238,034
|
|
|
237,170
|
|
|
236,731
|
|
Net income attributable to Amkor per common share:
|
|
|
|
|
|
Basic
|
$
|
0.69
|
|
|
$
|
0.22
|
|
|
$
|
0.56
|
|
Diluted
|
0.69
|
|
|
0.22
|
|
|
0.55
|
|
The following table summarizes the potential shares of common stock that were excluded from diluted EPS, because the effect of including these potential shares was anti-dilutive:
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
2016
|
|
2015
|
|
2014
|
|
(In thousands)
|
Stock options and restricted share awards
|
1,135
|
|
|
1,858
|
|
|
1,303
|
|
AMKOR TECHNOLOGY, INC.
Notes to Consolidated Financial Statements — (Continued)
|
|
8.
|
Factoring of Accounts Receivable
|
In certain foreign locations, we use non-recourse factoring arrangements with third party financial institutions to manage our working capital and cash flows. Under this program, we sell receivables to a financial institution for cash at a discount to the face amount. As part of the factoring arrangements, we perform certain collection and administrative functions for the receivables sold. For the year ended
December 31, 2016
and
2015
, we sold accounts receivable totaling
$574.1 million
and
$323.5 million
, respectively, for a discount, plus fees, of
$2.5 million
and
$1.5 million
, respectively.
Inventories consist of the following:
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2016
|
|
2015
|
|
(In thousands)
|
Raw materials and purchased components
|
$
|
173,035
|
|
|
$
|
163,024
|
|
Work-in-process
|
94,955
|
|
|
75,181
|
|
Total inventories
|
$
|
267,990
|
|
|
$
|
238,205
|
|
|
|
10.
|
Property, Plant and Equipment
|
Property, plant and equipment consist of the following:
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2016
|
|
2015
|
|
(In thousands)
|
Land
|
$
|
240,719
|
|
|
$
|
237,815
|
|
Land use rights
|
26,845
|
|
|
26,845
|
|
Buildings and improvements
|
1,362,007
|
|
|
1,010,201
|
|
Machinery and equipment
|
4,483,523
|
|
|
4,226,401
|
|
Software and computer equipment
|
205,969
|
|
|
197,266
|
|
Furniture, fixtures and other equipment
|
21,313
|
|
|
21,259
|
|
Construction in progress
|
87,037
|
|
|
352,607
|
|
Total property, plant and equipment
|
6,427,413
|
|
|
6,072,394
|
|
Less accumulated depreciation and amortization
|
(3,862,765
|
)
|
|
(3,493,377
|
)
|
Total property, plant and equipment, net
|
$
|
2,564,648
|
|
|
$
|
2,579,017
|
|
The following table summarizes our depreciation expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
2016
|
|
2015
|
|
2014
|
|
(In thousands)
|
Depreciation expense
|
$
|
552,989
|
|
|
$
|
492,458
|
|
|
$
|
463,540
|
|
In December 2016, we completed the initial phase of construction of K5 and transferred
$325.8 million
from construction in progress to building and improvements and machinery and equipment. We had
$44.8 million
and
$312.1 million
of costs for K5 in construction in progress as of
December 31, 2016
and 2015, respectively.
AMKOR TECHNOLOGY, INC.
Notes to Consolidated Financial Statements — (Continued)
As part of our plan to consolidate factory operations in Korea, we entered into an agreement in November 2016 to sell the land and buildings comprising our K1 factory for a sale price of
₩162.1 billion
(approximately
$135 million
). We received
10%
of the purchase price at signing and the balance is due at closing. The transaction is expected to close during the second quarter of 2017 at which time we expect to recognize a pre-tax gain of approximately
$100 million
.
The following table presents the changes in the carrying amount of goodwill:
|
|
|
|
|
|
Goodwill
|
|
(In thousands)
|
Balance as of December 31, 2014
|
$
|
—
|
|
Goodwill acquired
|
23,409
|
|
Balance as of December 31, 2015
|
$
|
23,409
|
|
Translation adjustments
|
713
|
|
Balance as of December 31, 2016
|
$
|
24,122
|
|
Goodwill relates to the increase in our ownership interest in J-Devices to
100%
on
December 30, 2015
(
Note 3
). No goodwill impairment has been identified in any of the years presented.
Accrued expenses consist of the following:
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2016
|
|
2015
|
|
(In thousands)
|
Payroll and benefits
|
$
|
117,636
|
|
|
$
|
95,011
|
|
Deferred revenue and customer advances
|
65,653
|
|
|
49,243
|
|
Income taxes payable
|
37,961
|
|
|
21,448
|
|
Accrued settlement costs
|
35,304
|
|
|
32,987
|
|
Accrued severance plan obligations (Note 14)
|
14,053
|
|
|
14,306
|
|
Accrued interest
|
13,046
|
|
|
12,920
|
|
Other accrued expenses
|
55,016
|
|
|
38,297
|
|
Total accrued expenses
|
$
|
338,669
|
|
|
$
|
264,212
|
|
AMKOR TECHNOLOGY, INC.
Notes to Consolidated Financial Statements — (Continued)
Following is a summary of short-term borrowings and long-term debt:
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2016
|
|
2015
|
|
(In thousands)
|
Debt of Amkor Technology, Inc.:
|
|
|
|
Senior secured credit facilities:
|
|
|
|
$200 million revolving credit facility, LIBOR plus 1.25%-1.75%, due December 2019 (1)
|
$
|
—
|
|
|
$
|
100,000
|
|
Senior notes:
|
|
|
|
6.625% Senior notes, due June 2021, $75 million related party
|
400,000
|
|
|
400,000
|
|
6.375% Senior notes, due October 2022
|
524,971
|
|
|
525,000
|
|
Debt of subsidiaries:
|
|
|
|
Amkor Technology Korea, Inc.:
|
|
|
|
$100 million revolving credit facility, foreign currency funding-linked base rate plus 1.60%, due June 2017 (2)
|
—
|
|
|
40,000
|
|
Term loan, LIBOR plus 2.60%, due May 2018
|
120,000
|
|
|
120,000
|
|
Term loan, LIBOR plus 2.70%, due December 2019
|
55,000
|
|
|
70,000
|
|
Term loan, foreign currency funding-linked base rate plus 1.32%, due May 2020
|
150,000
|
|
|
150,000
|
|
Term loan, foreign currency funding-linked base rate plus 1.33%, due May 2020
|
80,000
|
|
|
80,000
|
|
Term loan, fund floating rate plus 1.60%, due June 2020 (3)
|
86,000
|
|
|
40,000
|
|
J-Devices Corporation:
|
|
|
|
Short-term term loans, variable rate (4)
|
22,230
|
|
|
15,582
|
|
Term loans, fixed rate at 0.53%, due April 2018
|
19,460
|
|
|
31,465
|
|
Short-term term loans, fixed rate at 0.50%
|
—
|
|
|
5,808
|
|
Term loans, TIBOR plus 1.00%
|
—
|
|
|
2,800
|
|
Other:
|
|
|
|
Revolving credit facility, TAIFX plus a bank-determined spread, due November 2020 (Taiwan) (5)
|
20,000
|
|
|
10,000
|
|
Term loan, LIBOR plus 1.80%, due December 2019 (China) (6)
|
—
|
|
|
—
|
|
|
1,477,661
|
|
|
1,590,655
|
|
Less: Unamortized premium and deferred debt costs, net
|
(2,831
|
)
|
|
(3,616
|
)
|
Less: Short-term borrowings and current portion of long-term debt
|
(35,192
|
)
|
|
(76,770
|
)
|
Long-term debt (including related party)
|
$
|
1,439,638
|
|
|
$
|
1,510,269
|
|
|
|
(1)
|
Our
$200.0 million
senior secured revolving credit facility has a letter of credit sub-limit of
$25.0 million
. Principal is payable at maturity.
The availability for the revolving credit facility is based on the amount of our eligible accounts receivable, which exceeded $200.0 million
as of
December 31, 2016
. Additionally, we had
$0.5 million
of standby letters of credit outstanding, resulting in
$199.5 million
available to be drawn.
|
|
|
(2)
|
In June 2012, we entered into a
$41.0 million
revolving credit facility. In March 2016, we increased the facility to
$100.0 million
. In June 2016, we amended the maturity date to June 2017. Principal is payable at maturity. As of
December 31, 2016
,
$100.0 million
was available to be drawn.
|
AMKOR TECHNOLOGY, INC.
Notes to Consolidated Financial Statements — (Continued)
|
|
(3)
|
In May 2015, we entered into a term loan agreement pursuant to which we may borrow up to
$150.0 million
for capital expenditures. In November 2016, the loan agreement was amended to extend the period for which we may borrow to June 2020. Principal is payable at maturity. At
December 31, 2016
,
$64.0 million
was available to be borrowed.
|
|
|
(4)
|
We entered into various short-term loans which mature semi-annually. Principle is payable in monthly installments. As of
December 31, 2016
,
$4.7 million
was available to be drawn.
|
|
|
(5)
|
In November 2015, we entered into a
$39.0 million
revolving credit facility. Principal is payable at maturity. As of
December 31, 2016
,
$19.0 million
was available to be drawn.
|
|
|
(6)
|
In December 2016, we entered into a
$50.0 million
term loan agreement. Principal is payable in semiannual installments of
$0.5 million
, with the remaining balance due at maturity. In January 2017, we borrowed
$50.0 million
.
|
Our foreign debt is generally collateralized by the land, buildings and equipment in the respective locations. The carrying value of the collateral exceeds the carrying amount of the debt.
Interest Rates
Interest is payable semiannually on our senior notes and quarterly or monthly on our other variable and fixed rate debt. Refer to the table above for the interest rates on our fixed rate debt and to the table below for the interest rates on our variable rate debt.
|
|
|
|
|
|
|
|
Variable Interest Rates at December 31,
|
|
2016
|
|
2015
|
Amkor Technology, Inc.:
|
|
|
|
$200 million revolving credit facility, LIBOR plus 1.25%-1.75%, due December 2019
|
—
|
%
|
|
2.13
|
%
|
Amkor Technology Korea, Inc.:
|
|
|
|
$100 million revolving credit facility, foreign currency funding-linked base rate plus 1.60%, due June 2017
|
—
|
%
|
|
3.32
|
%
|
Term loan, LIBOR plus 2.60%, due May 2018
|
3.49
|
%
|
|
2.99
|
%
|
Term loan, LIBOR plus 2.70%, due December 2019
|
3.54
|
%
|
|
3.02
|
%
|
Term loan, foreign currency funding-linked base rate plus 1.32%, due May 2020
|
3.58
|
%
|
|
3.19
|
%
|
Term loan, foreign currency funding-linked base rate plus 1.33%, due May 2020
|
3.59
|
%
|
|
3.19
|
%
|
Term Loan, fund floating rate plus 1.60%, due June 2020
|
2.79
|
%
|
|
2.32
|
%
|
J-Devices Corporation:
|
|
|
|
Short-term credit facilities, variable rate
|
0.32
|
%
|
|
0.46
|
%
|
Term loans, TIBOR plus 1.00%
|
—
|
%
|
|
1.13
|
%
|
Amkor Technology Taiwan Ltd.:
|
|
|
|
Revolving credit facility, TAIFX plus a bank-determined spread, due November 2020
|
2.78
|
%
|
|
1.66
|
%
|
Compliance with Debt Covenants
The debt of Amkor Technology, Inc. is structurally subordinated in right of payment to all existing and future debt and other liabilities of our subsidiaries. The agreements governing our indebtedness contain a number of affirmative and negative covenants which restrict our ability to pay dividends and could restrict our operations. We have never paid a dividend to our stockholders and we do not have any present plans for doing so. We were in compliance with all of our covenants at
December 31, 2016
and
2015
.
AMKOR TECHNOLOGY, INC.
Notes to Consolidated Financial Statements — (Continued)
Maturities
|
|
|
|
|
|
Total Debt
|
|
(In thousands)
|
Payments due for the year ending December 31,
|
|
2017
|
$
|
35,192
|
|
2018
|
126,498
|
|
2019
|
135,000
|
|
2020
|
256,000
|
|
2021
|
400,000
|
|
Thereafter
|
524,971
|
|
Total debt
|
$
|
1,477,661
|
|
14.
Pension and Severance Plans
Korean Severance Plan
Our subsidiary in Korea maintains an unfunded severance plan that covers certain employees that were employed prior to August 1, 2015. To the extent eligible employees are terminated, our subsidiary in Korea would be required to make lump-sum severance payments on behalf of these eligible employees for service provided prior to August 1, 2015. Factors used to determine severance benefits include employees' length of service, seniority and rate of pay. The employees' length of service and seniority are fixed as of July 31, 2015. The employees' rate of pay is adjusted to the rate of pay at the time of termination. Accrued severance benefits are estimated assuming all eligible employees were to terminate their employment at the balance sheet date. Our contributions to the National Pension Plan of the Republic of Korea are deducted from accrued severance benefit liabilities. On August 1, 2015, our subsidiary in Korea began sponsoring a defined benefit pension plan and a defined contribution plan. Existing employees at that time were given the option of choosing either a defined benefit pension plan or a defined contribution plan for their future benefits and new employees since that date are enrolled in a defined contribution plan.
The changes to the balance of our severance accrual are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
2016
|
|
2015
|
|
2014
|
|
(In thousands)
|
Balance at the beginning of year
|
$
|
143,151
|
|
|
$
|
146,880
|
|
|
$
|
145,373
|
|
Provision of severance benefits
|
6,746
|
|
|
21,088
|
|
|
17,593
|
|
Severance payments
|
(9,429
|
)
|
|
(15,021
|
)
|
|
(10,160
|
)
|
(Gain) loss on foreign currency
|
(4,072
|
)
|
|
(9,796
|
)
|
|
(5,926
|
)
|
|
136,396
|
|
|
143,151
|
|
|
146,880
|
|
Payments remaining with the National Pension Fund
|
(182
|
)
|
|
(192
|
)
|
|
(219
|
)
|
Total severance obligation balance at the end of year
|
136,214
|
|
|
142,959
|
|
|
146,661
|
|
Less current portion of accrued severance obligation (Note 12)
|
14,053
|
|
|
14,306
|
|
|
13,226
|
|
Non-current portion of severance obligation
|
$
|
122,161
|
|
|
$
|
128,653
|
|
|
$
|
133,435
|
|
AMKOR TECHNOLOGY, INC.
Notes to Consolidated Financial Statements — (Continued)
Foreign Defined Benefit Pension Plans
Our subsidiaries in Japan, Korea, Malaysia, the Philippines and Taiwan sponsor defined benefit plans (the “Plans”). Charges to expense are based upon actuarial analyses.
The following table summarizes the Plans’ benefit obligations, fair value of the Plans’ assets and the funded status of the Plans at
December 31, 2016
and
2015
.
|
|
|
|
|
|
|
|
|
|
For the Year Ended
December 31,
|
|
2016
|
|
2015
|
|
(In thousands)
|
Change in projected benefit obligation:
|
|
|
|
Projected benefit obligation at beginning of year
|
$
|
109,695
|
|
|
$
|
74,009
|
|
Service cost
|
33,854
|
|
|
12,481
|
|
Interest cost
|
3,641
|
|
|
2,954
|
|
Benefits paid
|
(8,499
|
)
|
|
(3,924
|
)
|
Actuarial (gain) loss
|
(2,801
|
)
|
|
(2,631
|
)
|
Acquisition (Note 3)
|
—
|
|
|
31,859
|
|
Settlement
|
(1,165
|
)
|
|
—
|
|
Foreign exchange (gain) loss
|
(3,309
|
)
|
|
(5,053
|
)
|
Projected benefit obligation at end of year
|
131,416
|
|
|
109,695
|
|
Change in plan assets:
|
|
|
|
Fair value of plan assets at beginning of year
|
76,042
|
|
|
54,771
|
|
Actual gain (loss) on plan assets
|
2,876
|
|
|
1,564
|
|
Employer contributions
|
25,114
|
|
|
12,190
|
|
Acquisition (Note 3)
|
—
|
|
|
13,935
|
|
Settlement
|
(1,165
|
)
|
|
—
|
|
Benefits paid
|
(8,499
|
)
|
|
(3,924
|
)
|
Foreign exchange gain (loss)
|
(2,897
|
)
|
|
(2,494
|
)
|
Fair value of plan assets at end of year
|
91,471
|
|
|
76,042
|
|
Funded status of the Plans at end of year
|
$
|
(39,945
|
)
|
|
$
|
(33,653
|
)
|
The accrued benefit liability, included in pension and severance obligations in the Consolidated Balance Sheets, as of
December 31, 2016
and
2015
was
$39.9 million
and
$33.7 million
, respectively. The accumulated benefit obligation as of
December 31, 2016
and
2015
was
$94.5 million
and
$77.6 million
, respectively.
AMKOR TECHNOLOGY, INC.
Notes to Consolidated Financial Statements — (Continued)
The following table summarizes, by component, the change in accumulated other comprehensive income (loss) related to our Plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prior Service
Cost
|
|
Actuarial Net Gain (Loss)
|
|
Total
|
|
(In thousands)
|
Balance at December 31, 2014, net of tax
|
$
|
540
|
|
|
$
|
(3,065
|
)
|
|
$
|
(2,525
|
)
|
Amortization included in net periodic pension cost
|
20
|
|
|
68
|
|
|
88
|
|
Net gain (loss) arising during period
|
—
|
|
|
1,012
|
|
|
1,012
|
|
Adjustments to unrealized components of defined benefit pension plan included in other comprehensive income (loss)
|
20
|
|
|
1,080
|
|
|
1,100
|
|
Balance at December 31, 2015, net of tax
|
$
|
560
|
|
|
$
|
(1,985
|
)
|
|
$
|
(1,425
|
)
|
Amortization included in net periodic pension cost
|
22
|
|
|
73
|
|
|
95
|
|
Net gain (loss) arising during period
|
—
|
|
|
2,468
|
|
|
2,468
|
|
Adjustments to unrealized components of defined benefit pension plan included in other comprehensive income (loss)
|
22
|
|
|
2,541
|
|
|
2,563
|
|
Balance at December 31, 2016, net of tax
|
$
|
582
|
|
|
$
|
556
|
|
|
$
|
1,138
|
|
|
|
|
|
|
|
Estimated amortization of cost to be included in 2017 net periodic pension cost
|
$
|
30
|
|
|
$
|
84
|
|
|
$
|
114
|
|
Information for pension plans with benefit obligations in excess of plan assets are as follows:
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2016
|
|
2015
|
|
(In thousands)
|
Plans with underfunded or non-funded projected benefit obligation:
|
|
|
|
Aggregate projected benefit obligation
|
$
|
131,416
|
|
|
$
|
101,832
|
|
Aggregate fair value of plan assets
|
91,471
|
|
|
67,622
|
|
Plans with underfunded or non-funded accumulated benefit obligation:
|
|
|
|
Aggregate accumulated benefit obligation
|
49,285
|
|
|
40,428
|
|
Aggregate fair value of plan assets
|
16,811
|
|
|
13,944
|
|
The following table summarizes net periodic pension costs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
2016
|
|
2015
|
|
2014
|
|
(In thousands)
|
Components of net periodic pension cost and total pension expense:
|
|
|
|
|
|
Service cost
|
$
|
33,854
|
|
|
$
|
12,481
|
|
|
$
|
5,042
|
|
Interest cost
|
3,641
|
|
|
2,954
|
|
|
3,051
|
|
Expected return on plan assets
|
(3,788
|
)
|
|
(3,330
|
)
|
|
(3,094
|
)
|
Amortization of prior service cost
|
35
|
|
|
34
|
|
|
116
|
|
Recognized actuarial (gain) loss
|
94
|
|
|
91
|
|
|
141
|
|
Net periodic pension cost
|
33,836
|
|
|
12,230
|
|
|
5,256
|
|
Settlement (gain) loss
|
128
|
|
|
27
|
|
|
97
|
|
Total pension expense
|
$
|
33,964
|
|
|
$
|
12,257
|
|
|
$
|
5,353
|
|
AMKOR TECHNOLOGY, INC.
Notes to Consolidated Financial Statements — (Continued)
As a result of the adoption of a defined benefit pension plan in Korea beginning on August 1, 2015, and the acquisition of J-Devices on December 30, 2015, our net periodic pension cost has increased from the prior periods.
The following table summarizes the weighted-average assumptions used in computing the net periodic pension cost and projected benefit obligation at
December 31, 2016
,
2015
and
2014
:
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
2016
|
|
2015
|
|
2014
|
Discount rate for determining net periodic pension cost
|
3.3
|
%
|
|
4.2
|
%
|
|
3.9
|
%
|
Discount rate for determining benefit obligations at year end
|
3.1
|
%
|
|
3.3
|
%
|
|
4.2
|
%
|
Rate of compensation increase for determining net periodic
pension cost
|
3.9
|
%
|
|
4.7
|
%
|
|
4.1
|
%
|
Rate of compensation increase for determining benefit obligations
at year end
|
3.8
|
%
|
|
3.9
|
%
|
|
4.7
|
%
|
Expected rate of return on plan assets for determining net periodic
pension cost
|
5.0
|
%
|
|
6.2
|
%
|
|
6.2
|
%
|
The measurement date for determining the Plans’ assets and benefit obligations is December 31, each year. Discount rates are generally derived from yield curves constructed from high-quality corporate or foreign government bonds, for which the timing and amount of cash outflows approximate the estimated payouts.
The expected rate of return assumption is based on weighted-average expected returns for each asset class. Expected returns reflect a combination of historical performance analysis and the forward-looking views of the financial markets and include input from our actuaries. We have no control over the direction of our investments in our defined benefit plans in Taiwan as the local Labor Standards Law Fund mandates such contributions into a cash account balance at the Bank of Taiwan. One of our defined benefit pension plans in Japan and our defined benefit pension plan in Malaysia are non-funded plans, and as such, no assets exist related to these plans. Our investment strategies for our other defined benefit plan in Japan and our defined benefit plans in Korea and the Philippines, are based on long-term, sustained asset growth through low to medium risk investments. The current rate of return assumption targets are based on asset allocation strategies as follows:
|
|
|
|
|
|
|
|
|
|
|
Allocation
|
|
Debt
|
|
Equity
|
|
Other
|
Japan defined benefit plan
|
59
|
%
|
|
39
|
%
|
|
2
|
%
|
Korea defined benefit plan
|
40
|
%
|
|
50
|
%
|
|
10
|
%
|
Philippine defined benefit plan
|
40
|
%
|
|
56
|
%
|
|
4
|
%
|
Philippine plan assets included Amkor common stock of
$0.6 million
at December 31, 2015. The common stock was sold in 2016.
AMKOR TECHNOLOGY, INC.
Notes to Consolidated Financial Statements — (Continued)
The fair value of our pension plan assets, by asset category utilizing the fair value hierarchy as discussed in
Note 16
, is as follows:
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2016
|
|
2015
|
|
(In thousands)
|
Cash and cash equivalents (Level 1)
|
$
|
10,419
|
|
|
$
|
14,944
|
|
Equity securities
|
|
|
|
U.S. securities (Level 1)
|
12,602
|
|
|
19,501
|
|
Foreign securities (Level 1)
|
8,825
|
|
|
10,689
|
|
Foreign mutual funds (Level 1)
|
12,718
|
|
|
—
|
|
|
34,145
|
|
|
30,190
|
|
Fixed income funds (Level 1)
|
—
|
|
|
3,492
|
|
Debt securities
|
|
|
|
U.S. government bonds (Level 1)
|
2,859
|
|
|
2,187
|
|
U.S. corporate bonds (Level 1)
|
1,980
|
|
|
—
|
|
Foreign government bonds (Level 1)
|
11,001
|
|
|
880
|
|
Foreign government bonds (Level 2)
|
7,727
|
|
|
8,092
|
|
Foreign corporate bonds (Level 2)
|
1,693
|
|
|
—
|
|
Foreign treasury notes (Level 1)
|
—
|
|
|
6,665
|
|
Foreign mutual funds (Level 1)
|
10,044
|
|
|
—
|
|
|
35,304
|
|
|
17,824
|
|
Foreign guaranteed investment contracts (Level 3)
|
2,445
|
|
|
842
|
|
Taiwan retirement fund (Level 1)
|
8,972
|
|
|
8,621
|
|
Other (Level 2)
|
186
|
|
|
129
|
|
Total
|
$
|
91,471
|
|
|
$
|
76,042
|
|
The Taiwan retirement fund category of our plan assets represents accounts that our subsidiaries in Taiwan have in a government labor retirement fund in the custody of the Bank of Taiwan. The accounts earn a minimum guaranteed rate of return and are invested in a mix of cash, domestic and foreign equity securities and domestic and foreign debt securities.
We expect to make contributions of approximately
$23 million
during
2017
. We closely monitor the funded status of the Plans with respect to legislative requirements. We intend to make at least the minimum contribution required by law each year.
The estimated future benefit payments related to our foreign defined benefit plans are as follows:
|
|
|
|
|
|
Payments
|
|
(In thousands)
|
2017
|
$
|
6,884
|
|
2018
|
5,748
|
|
2019
|
7,638
|
|
2020
|
9,579
|
|
2021
|
11,540
|
|
2022 to 2026
|
91,261
|
|
AMKOR TECHNOLOGY, INC.
Notes to Consolidated Financial Statements — (Continued)
Defined Contribution Plans
We sponsor defined contribution plans in Korea, Malaysia, Taiwan and the U.S. Total defined contribution expense was
$8.8 million
,
$8.6 million
and
$6.8 million
for
2016
,
2015
and
2014
, respectively.
|
|
15.
|
Accumulated Other Comprehensive Income (Loss)
|
The following table reflects the changes in accumulated other comprehensive income (loss), net of tax:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Defined Benefit Pension
|
|
Foreign Currency Translation
|
|
Equity Interest in J-Devices' Other Comprehensive Income (Loss)
|
|
Total
|
|
(In thousands)
|
Accumulated other comprehensive income (loss) at December 31, 2014
|
$
|
(2,525
|
)
|
|
$
|
(513
|
)
|
|
$
|
(29,433
|
)
|
|
$
|
(32,471
|
)
|
Other comprehensive income (loss) before reclassifications
|
1,012
|
|
|
(146
|
)
|
|
(154
|
)
|
|
712
|
|
Amounts reclassified from accumulated other comprehensive income (loss)
|
88
|
|
|
—
|
|
|
29,587
|
|
|
29,675
|
|
Other comprehensive income (loss)
|
1,100
|
|
|
(146
|
)
|
|
29,433
|
|
|
30,387
|
|
Accumulated other comprehensive income (loss) at December 31, 2015
|
$
|
(1,425
|
)
|
|
$
|
(659
|
)
|
|
$
|
—
|
|
|
$
|
(2,084
|
)
|
Other comprehensive income (loss) before reclassifications
|
2,468
|
|
|
5,783
|
|
|
—
|
|
|
8,251
|
|
Amounts reclassified from accumulated other comprehensive income (loss)
|
95
|
|
|
—
|
|
|
—
|
|
|
95
|
|
Other comprehensive income (loss)
|
2,563
|
|
|
5,783
|
|
|
—
|
|
|
8,346
|
|
Accumulated other comprehensive income (loss) at December 31, 2016
|
$
|
1,138
|
|
|
$
|
5,124
|
|
|
$
|
—
|
|
|
$
|
6,262
|
|
Amounts reclassified out of accumulated other comprehensive income (loss) are included as a component of net periodic pension cost (
Note 14
) or other (income) expense, net. In 2014, the amount reclassified out of accumulated other comprehensive income (loss) and included in other (income) expense, net was a result of the release of accumulated foreign currency translation adjustments associated with the sale of our subsidiary in Japan (
Note 3
). In 2015, the amount reclassified out of accumulated other comprehensive income (loss) and included in other (income) expense, net was due to the release of our previously held equity interest in J-Devices' accumulated foreign currency translation upon consolidation of J-Devices (
Note 3
).
|
|
16.
|
Fair Value Measurements
|
The accounting framework for determining fair value includes a hierarchy for ranking the quality and reliability of the information used to measure fair value, which enables the reader of the financial statements to assess the inputs used to develop those measurements. The fair value hierarchy consists of three tiers as follows: Level 1, defined as quoted market prices in active markets for identical assets or liabilities; Level 2, defined as inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, model-based valuation techniques for which all significant assumptions are observable in the market or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities and Level 3, defined as unobservable inputs that are not corroborated by market data.
The fair values of cash, accounts receivable, trade accounts payable, capital expenditures payable, and certain other current assets and accrued expenses approximate carrying values because of their short-term nature. The carrying value of certain
AMKOR TECHNOLOGY, INC.
Notes to Consolidated Financial Statements — (Continued)
other non-current liabilities approximates fair value. Our assets and liabilities recorded at fair value on a recurring basis include cash equivalent money market funds and restricted cash money market funds. We also review goodwill for impairment annually during the fourth quarter of each year. Cash equivalent money market funds and restricted cash money market funds are invested in U.S. money market funds and various U.S. and foreign bank operating and time deposit accounts, which are due on demand or carry a maturity date of less than three months when purchased. No restrictions have been imposed on us regarding withdrawal of balances with respect to our cash equivalents as a result of liquidity or other credit market issues affecting the money market funds we invest in or the counterparty financial institutions holding our deposits. Money market funds are valued using quoted market prices in active markets for identical assets.
Our recurring fair value measurements consist of the following:
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2016
|
|
2015
|
|
(In thousands)
|
Cash equivalent money market funds (Level 1)
|
$
|
39,548
|
|
|
$
|
81,473
|
|
Restricted cash money market funds (Level 1)
|
2,000
|
|
|
2,000
|
|
We also measure certain assets and liabilities, including property, plant and equipment and goodwill, at fair value on a nonrecurring basis.
We measure the fair value of our debt for disclosure purposes. The following table presents the fair value of financial instruments that are not recorded at fair value on a recurring basis:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
December 31, 2015
|
|
Fair
Value
|
|
Carrying
Value
|
|
Fair
Value
|
|
Carrying
Value
|
|
(In thousands)
|
Senior notes (Level 1)
|
$
|
954,765
|
|
|
$
|
922,140
|
|
|
$
|
902,563
|
|
|
$
|
921,384
|
|
Revolving credit facilities and term loans (Level 2)
|
551,793
|
|
|
552,690
|
|
|
664,085
|
|
|
665,655
|
|
Total debt
|
$
|
1,506,558
|
|
|
$
|
1,474,830
|
|
|
$
|
1,566,648
|
|
|
$
|
1,587,039
|
|
The estimated fair value of our senior notes is based primarily on quoted market prices reported on or near the respective balance sheet dates. The estimated fair value of our revolving credit facilities and term loans was calculated using a discounted cash flow analysis, which utilized market based assumptions including forward interest rates adjusted for credit risk.
|
|
17.
|
Commitments and Contingencies
|
We have a letter of credit sub-facility of
$25.0 million
under our
$200.0 million
senior secured revolving credit facility that matures in December 2019. As of
December 31, 2016
, we had
$0.5 million
of standby letters of credit outstanding. Such standby letters of credit are used in the ordinary course of our business and are collateralized by our cash balances.
We generally warrant that our services will be performed in a professional and workmanlike manner and in compliance with our customers’ specifications. We accrue costs for known warranty issues. Historically, our warranty costs have been immaterial.
Legal Proceedings
We are involved in claims and legal proceedings and may become involved in other legal matters arising in the ordinary course of our business. We evaluate these claims and legal matters on a case-by-case basis to make a determination as to the impact, if any, on our business, liquidity, results of operations, financial condition or cash flows. Although the outcome of these matters is uncertain, we believe that the ultimate outcome of these claims and proceedings, individually and in the
AMKOR TECHNOLOGY, INC.
Notes to Consolidated Financial Statements — (Continued)
aggregate, will not have a material adverse impact to us. Our evaluation of the potential impact of these claims and legal proceedings on our business, liquidity, results of operations, financial condition or cash flows could change in the future.
Settlement of Patent License Litigation
In January 2015, we settled our patent license litigation with Tessera. Under the terms of the settlement, Amkor agreed to pay Tessera a total of
$155.0 million
in
16
equal quarterly recurring payments commencing in the first quarter of 2015, and continuing through the fourth quarter of 2018. During the three months ended December 31, 2014, we recorded a pre-tax charge of
$87.1 million
, of which
$75.3 million
was charged to cost of sales and
$11.8 million
was charged to interest expense. This charge reflected the aggregate amount due under the settlement agreement, net of amounts previously reserved.
At
December 31, 2016
, the remaining amount we owe Tessera under our settlement agreement was
$77.5 million
. The current portion of this liability is recorded in accrued expenses (
Note 12
) and the non-current portion is recorded in other non-current liabilities in our Consolidated Financial Statements. We will also charge
$4.4 million
of the amount owed to interest expense over the remaining two year term of the arrangement.
Leases
Future minimum lease payments under operating leases that have initial or remaining noncancelable lease terms in excess of one year are:
|
|
|
|
|
|
Lease Payments
|
|
(In thousands)
|
2017
|
$
|
20,079
|
|
2018
|
11,893
|
|
2019
|
9,783
|
|
2020
|
5,321
|
|
2021
|
4,054
|
|
Thereafter
|
8,596
|
|
Total
|
$
|
59,726
|
|
Rent expense amounted to
$43.8 million
,
$24.5 million
and
$28.5 million
for
2016
,
2015
and
2014
, respectively.
In order to provide packaging and test services, we purchase materials under various long-term supply contracts. Future minimum payments to be made under these contracts for the period 2017 through 2025 are
$14.3 million
.
|
|
18.
|
Business Segments, Customer Concentrations and Geographic Information
|
We operate as a single operating segment as managed by our Chief Executive Officer, who is considered our chief operating decision maker ("CODM"). The CODM bears the ultimate responsibility for, and is actively engaged in, the allocation of resources and the evaluation of our operating and financial results. We have concluded that we have a single operating segment based on the following:
|
|
•
|
We are managed under a functionally-based organizational structure with the head of each function reporting directly to the CODM;
|
|
|
•
|
We assess performance, including incentive compensation, based on consolidated operating performance and financial results;
|
|
|
•
|
Our CODM allocates resources and makes other operating decisions based on specific customer business opportunities and
|
AMKOR TECHNOLOGY, INC.
Notes to Consolidated Financial Statements — (Continued)
|
|
•
|
We have an integrated process for the design, development and manufacturing services we provide to all of our customers. We also have centralized sales and administrative functions.
|
The following table presents net sales by product group:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales for the Year Ended December 31,
|
|
2016
|
|
2015
|
|
2014
|
|
(In thousands)
|
Advanced products
|
$
|
1,679,529
|
|
|
$
|
1,432,493
|
|
|
$
|
1,552,948
|
|
Mainstream products
|
2,214,106
|
|
|
1,452,110
|
|
|
1,576,492
|
|
Total net sales
|
$
|
3,893,635
|
|
|
$
|
2,884,603
|
|
|
$
|
3,129,440
|
|
The following table presents net sales by country based on customer headquarters location:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales for the Year Ended December 31,
|
|
2016
|
|
2015
|
|
2014
|
|
(In thousands)
|
Japan
|
$
|
1,158,318
|
|
|
$
|
372,810
|
|
|
$
|
472,152
|
|
Asia Pacific (excluding Japan)
|
627,177
|
|
|
609,409
|
|
|
614,909
|
|
Europe, Middle East and Africa
|
487,584
|
|
|
489,842
|
|
|
426,969
|
|
Total foreign countries
|
2,273,079
|
|
|
1,472,061
|
|
|
1,514,030
|
|
United States
|
1,620,556
|
|
|
1,412,542
|
|
|
1,615,410
|
|
Total net sales
|
$
|
3,893,635
|
|
|
$
|
2,884,603
|
|
|
$
|
3,129,440
|
|
One customer accounted for
15.8%
,
11.0%
, and
13.2%
and a second customer accounted for
12.7%
,
14.4%
and
17.5%
of net sales in
2016
,
2015
and
2014
, respectively.
The following table presents property, plant and equipment, net, based on the physical location of the asset:
|
|
|
|
|
|
|
|
|
|
Property, Plant and Equipment, Net
at December 31,
|
|
2016
|
|
2015
|
|
(In thousands)
|
China
|
$
|
500,319
|
|
|
$
|
513,175
|
|
Japan
|
245,233
|
|
|
230,436
|
|
Korea
|
1,130,147
|
|
|
1,124,435
|
|
Malaysia
|
36,248
|
|
|
39,037
|
|
Philippines
|
313,885
|
|
|
328,604
|
|
Taiwan
|
326,614
|
|
|
330,604
|
|
Other foreign countries
|
243
|
|
|
261
|
|
Total foreign countries
|
2,552,689
|
|
|
2,566,552
|
|
United States
|
11,959
|
|
|
12,465
|
|
Total property, plant and equipment, net
|
$
|
2,564,648
|
|
|
$
|
2,579,017
|
|
AMKOR TECHNOLOGY, INC.
Notes to Consolidated Financial Statements — (Continued)
|
|
19.
|
Revision of Previously Reported Financial Information
|
In the second quarter of 2016, during our post-acquisition integration of J-Devices, we identified an error in the provision for income taxes in the financial statements for J-Devices for the periods beginning in 2012 through the fourth quarter of 2015. During those periods we did not control J-Devices and, accordingly, we accounted for our investment in J-Devices using the equity method. As a result of the J-Devices error, our equity in earnings of J-Devices was overstated by the cumulative amount of
$8.0 million
. We believe that the error is not material to Amkor for the periods impacted and have elected to revise our previously issued consolidated financial statements. We have also recorded the impact of the revision in our purchase accounting for the acquisition of J-Devices on December 30, 2015 (Note 3). Periods presented herein are based on the revised financial results.
The following table presents the effect of the aforementioned revisions on our Consolidated Balance Sheet as of December 31, 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015
|
|
As Reported
|
|
Adjustments
|
|
As Revised
|
|
(In thousands)
|
Goodwill
|
$
|
19,443
|
|
|
$
|
3,966
|
|
|
$
|
23,409
|
|
Total assets
|
4,022,462
|
|
|
3,966
|
|
|
4,026,428
|
|
Other non-current liabilities
|
101,679
|
|
|
11,563
|
|
|
113,242
|
|
Total liabilities
|
2,797,329
|
|
|
11,563
|
|
|
2,808,892
|
|
Accumulated deficit
|
(460,150
|
)
|
|
(7,597
|
)
|
|
(467,747
|
)
|
Total Amkor stockholders’ equity
|
1,207,883
|
|
|
(7,597
|
)
|
|
1,200,286
|
|
Total equity
|
1,225,133
|
|
|
(7,597
|
)
|
|
1,217,536
|
|
Total liabilities and equity
|
4,022,462
|
|
|
3,966
|
|
|
4,026,428
|
|
The following tables present the effect of the aforementioned revisions on our Consolidated Statements of Income for the years ended December 31, 2015 and 2014:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31, 2015
|
|
For the Year Ended December 31, 2014
|
|
As Reported
|
|
Adjustments
|
|
As Revised
|
|
As Reported
|
|
Adjustments
|
|
As Revised
|
|
(In thousands, except per share data)
|
Other (income) expense, net
|
$
|
10,928
|
|
|
$
|
(377
|
)
|
|
$
|
10,551
|
|
|
$
|
(24,543
|
)
|
|
$
|
—
|
|
|
$
|
(24,543
|
)
|
Equity in earnings of J-Devices
|
20,107
|
|
|
(6,091
|
)
|
|
14,016
|
|
|
31,654
|
|
|
(647
|
)
|
|
31,007
|
|
Net income
|
59,607
|
|
|
(5,714
|
)
|
|
53,893
|
|
|
133,887
|
|
|
(647
|
)
|
|
133,240
|
|
Net income attributable to Amkor
|
56,812
|
|
|
(5,714
|
)
|
|
51,098
|
|
|
130,386
|
|
|
(647
|
)
|
|
129,739
|
|
Net income attributable to Amkor per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
0.24
|
|
|
$
|
(0.02
|
)
|
|
$
|
0.22
|
|
|
$
|
0.56
|
|
|
$
|
—
|
|
|
$
|
0.56
|
|
Diluted
|
0.24
|
|
|
(0.02
|
)
|
|
0.22
|
|
|
0.55
|
|
|
—
|
|
|
0.55
|
|
AMKOR TECHNOLOGY, INC.
Notes to Consolidated Financial Statements — (Continued)
The following tables present the effect of the aforementioned revisions on our Consolidated Statements of Comprehensive Income for the years ended December 31, 2015 and 2014, and the three months ended March 31, 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31, 2015
|
|
For the Year Ended December 31, 2014
|
|
As Reported
|
|
Adjustments
|
|
As Revised
|
|
As Reported
|
|
Adjustments
|
|
As Revised
|
|
(In thousands)
|
Net income
|
$
|
59,607
|
|
|
$
|
(5,714
|
)
|
|
$
|
53,893
|
|
|
$
|
133,887
|
|
|
$
|
(647
|
)
|
|
$
|
133,240
|
|
Equity interest in J-Devices' other comprehensive income (loss), net of tax
|
29,829
|
|
|
(396
|
)
|
|
29,433
|
|
|
(19,136
|
)
|
|
292
|
|
|
(18,844
|
)
|
Total other comprehensive income (loss)
|
30,783
|
|
|
(396
|
)
|
|
30,387
|
|
|
(32,612
|
)
|
|
292
|
|
|
(32,320
|
)
|
Comprehensive income
|
90,390
|
|
|
(6,110
|
)
|
|
84,280
|
|
|
101,275
|
|
|
(355
|
)
|
|
100,920
|
|
Comprehensive income attributable to Amkor
|
87,595
|
|
|
(6,110
|
)
|
|
81,485
|
|
|
97,774
|
|
|
(355
|
)
|
|
97,419
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended March 31, 2016
|
|
As Reported
|
|
Adjustments
|
|
As Revised
|
|
(In thousands)
|
Foreign currency translation adjustment
|
$
|
19,864
|
|
|
$
|
(541
|
)
|
|
$
|
19,323
|
|
Total other comprehensive income (loss)
|
19,888
|
|
|
(541
|
)
|
|
19,347
|
|
Comprehensive income
|
19,483
|
|
|
(541
|
)
|
|
18,942
|
|
Comprehensive income attributable to Amkor
|
19,013
|
|
|
(541
|
)
|
|
18,472
|
|
The following table presents the effect of the aforementioned revisions on our Consolidated Statements of Cash Flows for the years ended December 31, 2015 and 2014:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31, 2015
|
|
For the Year Ended December 31, 2014
|
|
As Reported
|
|
Adjustments
|
|
As Revised
|
|
As Reported
|
|
Adjustments
|
|
As Revised
|
|
(In thousands)
|
Net income
|
$
|
59,607
|
|
|
$
|
(5,714
|
)
|
|
$
|
53,893
|
|
|
$
|
133,887
|
|
|
$
|
(647
|
)
|
|
$
|
133,240
|
|
Equity in earnings of unconsolidated affiliate
|
(20,107
|
)
|
|
6,091
|
|
|
(14,016
|
)
|
|
(31,654
|
)
|
|
647
|
|
|
(31,007
|
)
|
Loss from acquisition of J-Devices
|
13,878
|
|
|
(377
|
)
|
|
13,501
|
|
|
—
|
|
|
—
|
|
|
—
|
|
On February 1, 2017, we entered into a definitive agreement to acquire
100%
of the shares of NANIUM S.A., a provider of wafer-level fan-out semiconductor packaging solutions. The transaction is expected to close in the first quarter of 2017, subject to customary closing conditions and regulatory approvals.